Indian government bonds rose in early trade on Monday, led by ultra-long maturities after states announced lower-than-expected borrowing for the current quarter, boosting sentiment.
The yield on the 10-year benchmark note was at 6.5029 per cent as of 9:50a.m. IST, after ending at 6.5114 per cent on Friday. Other bond yields were down 3-4 basis points.
Bond yields move inversely to prices.
“State debt supply was a major concern for the market, and with that sorted out at least for the time being, the factors that could put an upward pressure on bond yields are limited,” trader with a state-run bank said.
Indian states will borrow $31.78 billion through the sale of bonds in the October-December quarter.
This comes after the centre reduced the share of ultra-long bonds in its borrowing plan for the fiscal second half.
Demand-supply scenario to be further supported after at least four major state-owned banks increased their internal limits for investing in these securities, following discussions with the Reserve Bank of India last month, five treasury officials told Reuters.
Bond bulls are hopeful of monetary easing after the RBI last week kept its policy rate unchanged as expected, but said that low inflation had opened up policy space for supporting growth.
Most market participants now expect a rate cut in December, with many also eyeing another such action in February. The RBI has cut rates by 100 basis points in 2025 so far.
Rates
India’s overnight index swaps (OIS) were barley changed in thin early deals.
The one-year OIS rate was note yet traded, while the two-year OIS rate was at 5.40 per cent. The five-year OIS rate was 5.67 per cent.