The yield on the benchmark 10-year bond stood at 6.5415% at 10:40 am IST. On Friday it closed at 6.5317%,
Bond yields rise when prices fall.
Indian government bonds fell in early trading as a weaker rupee and tight liquidity countered the Reserve Bank of India’s decision to halt bond sales. The central bank’s action, aimed at signaling unease about rising interest rates, gave the market a brief boost. However, the RBI’s defense interventions on the rupee have tightened liquidity, impacting bond demand.
The Reserve Bank of India on Friday rejected bids for 110 billion rupees of the 6.28% 2032 bond, briefly causing the 10-year yield to fall 7 basis points from an intraday high of 6.60%.
The rally faded as a weaker rupee, tight liquidity and supply-demand imbalance hurt sentiment.
The rupee has been hovering near a low of 88.80 with traders saying the RBI intervened to defend the currency, which in turn has driven liquidity out of the market. “Any liquidity measures taken by the RBI and any further action such as not accepting bids at auction are likely to signal the price to the market,” said a trader at a private bank. The liquidity of India’s banking system has fluctuated between shortages in recent days, largely due to central bank interventions, traders said.
Net liquidity injections have remained within a narrow range of Rs 500 billion over the past eight days, CCIL data shows.
PRICES
India’s overnight interest rate (OIS) remained flat during casual trading early Monday.
The one-year OIS rate was steady at 5.4725% and the two-year rate was flat at 5.4250%. The five-year swap rate remained little changed at 5.67%.
($1 = 88.7250 Indian Rupees).
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