Indian government bond yields were little changed on Friday, with a downward bias expected in early trading as traders remained optimistic about some monetary policy easing by the central bank, expected to be decided later in the day. It becomes.
The benchmark 10-year bond yield is likely to remain between 6.66% and 6.68% until the decision is announced, compared with the previous close of 6.6802%, said a trader at a private bank. .
“The big day has finally arrived. Preparations for the main event have been eventful and yields could fall further if the decision favors the doves,” the trader said.
Bond yields and overnight index swap rates as investors look forward to some policy easing after India’s economic growth slowed to 5.4% in the July-September period, the lowest in seven quarters. decreased.
Following Friday’s growth data, the benchmark 10-year Treasury yield fell 12 basis points (bps) to a three-year low, while swap rates fell by about 20 basis points (bps). The spread between the 10-year bond yield and the central bank’s key interest rate also fell to its lowest level in seven years.
Indicators suggest easing, which may not come through interest rates, but instead through liquidity injections, including lower cash reserve ratios (CRR).
While the majority of market participants expect interest rates to remain unchanged, Nomura and ANZ expect a 25bp rate cut by the Reserve Bank of India (RBI).
Economist Dhiraj Nim said: “Inflation is just a (temporary) vegetable price problem and monetary policy can’t do much about it, so keeping interest rates high at a time when growth clearly needs support It doesn’t make sense for me to do that.” Exchange rate strategist at ANZ.
Meanwhile, the U.S. 10-year Treasury yield fell further on Friday ahead of November’s non-farm payrolls report to be released after Indian market hours, setting the pace for Fed rate cuts. It has the potential to become a material for
The probability that the US will cut interest rates by 25 basis points in December rose to 71% from 67% last week. Key indicators: ** Brent crude oil futures were down 0.3% at $71.85 per barrel, after easing 0.3% in the previous session. ** The 10-year US Treasury yield was 4.1761%. 2-year bond yield was 4.1522% ** India to sell sovereign bonds worth 30,000 rupees ($3.54 billion) ** RBI sets underwriting fee for sovereign bond auctions at 30,000 rupees ($1 = 84.6850 Indian Rupees)
