MUMBAI, May 20 (Reuters) – Indian government bond yields are expected to open with a marginal upside bias on Tuesday, a day after the central bank bought lesser than scheduled quantum of bonds, triggering some selling pressure.
The yield on the new benchmark bond maturing in 2035 is expected to move between 6.22% and 6.26%, a trader with a private bank said, compared with the previous close of 6.2382%. The 2034 bond yield ended at 6.2904%.
On Monday, the Reserve Bank of India bought bonds worth 192.03 billion rupees ($2.25 billion), less than 80% of its targeted 250 billion rupees. This was also the last scheduled open market bond purchase as per the central bank’s calendar.
“There was some reaction to the fact that the RBI chose not to go for the full quantum, as they may have wanted to avoid yield signal, which led to a selloff,” the trader said.
The RBI had bought bonds worth 1 trillion rupees in the last two weeks, which followed 3.65 trillion rupees of purchases in the first four months of 2025. It had also bought bonds worth 388 billion rupees through the secondary market in January.
Traders will now focus on the quantum of RBI’s dividend payment to the government, which is expected to be announced soon.
Economists expect the central bank to transfer a record surplus this year, with Citi estimating it in the range of 3.5-4 trillion rupees, sharply higher than 2.1 trillion rupees in the previous year.
India’s overnight index swap (OIS) rates rose marginally on Monday and are expected to remain in a narrow range on Tuesday.
The one-year OIS rate was at 5.63%, the two-year OIS rate was at 5.53%, while the most liquid five-year OIS rate ended five bps higher at 5.71%.
KEY INDICATORS: ** Brent crude futures were 0.1% higher at $65.60 per barrel, after rising 0.2% in previous session ** Ten-year U.S. Treasury yield at 4.4493%; two-year yield at 3.9765% ** Indian states aim to raise 148 billion rupees through bond sale ** RBI to conduct one-day variable rate repo auction for 250 billion rupees ($1 = 85.4080 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Eileen Soreng)
