Indian government bond prices were off opening lows on Monday as bets of further monetary policy easing offset the impact of a lower-than-expected central bank surplus transfer to the government.
The yield on the new benchmark 10-year bond was at 6.2124% as of 10:00 a.m. IST, compared with the previous close of 6.2107%. The 2034 bond yield was at 6.2553% after settling at 6.2520% on Friday.
Yields on these 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.
“The figure is lower than what market had wanted, but will not change the medium-term market view, which is guided by the central bank’s liquidity injection and rate cuts of at least 50 basis points more in the coming months,” a trader with a state-run bank said.
All eyes on India GDP data
Investors await India’s GDP data on Friday, followed by the central bank’s policy decision on June 6, where a third consecutive rate cut is widely expected.
India’s economy likely grew 6.7% in January–March, up from 6.2% in the previous quarter, according to a Reuters poll.
The overnight index swap (OIS) rates could continue to see some receiving interest on expectation of lower interest rates.
The one-year OIS rate was at 5.55%, while the two-year OIS rate was not yet traded.
The most liquid five-year dipped 2 basis points to 5.65% after rising 4 bps on Friday.
