MUMBAI, May 26 (Reuters) – Indian government bond prices rose on Monday, recovering from an early fall caused by a lower-than-expected central bank surplus transfer, as bets of further monetary policy easing boosted demand.
The yield on the new benchmark 10-year bond ended at 6.2046%, compared with the previous close of 6.2107%. The 2034 bond yield ended at 6.2539% after settling at 6.2520% on Friday.
Yields on the bonds rose to 6.2270% and 6.2812%, respectively, in opening deals.
Bond yields move inversely to prices.
The Reserve Bank of India’s board approved the transfer of 2.69 trillion rupees ($31.6 billion) as surplus to the federal government for the fiscal year ended March, up from 2.11 trillion rupees in the previous year, it said on Friday.
Market participants had expected the amount to cross 3 trillion rupees.
Investors await India’s economic growth data due on Friday. The economy likely grew 6.7% in January–March, up from 6.2% in the previous quarter, according to a Reuters poll.
This would be followed by the central bank’s monetary policy decision on June 6, when a third consecutive rate cut is widely expected.
The RBI has cut the policy repo rate by 50 basis points since April and has infused around $100 billion in the last six months.
“Even though we see a liquidity deluge in the coming months, we do not see it impeding a June rate cut or depth of the easing cycle. We maintain terminal policy rate could reach 5.25%,” said Madhavi Arora, chief economist at Emkay Global Financial Services.
RATES The near-end overnight index swap (OIS) rate were largely unchanged, with the one-year OIS rate ending at 5.53%, while the two-year OIS rate was at 5.44%.
The most liquid five-year dipped slightly to 5.62%. ($1 = 85.0960 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)
