Yields move inversely to prices.India’s growth figures for July-September will be released on Friday and a Reuters poll shows the economy is likely to have grown by 7.3%, following 7.8% growth in April-June.
“Friday’s growth report is likely to deliver a 7.5% above consensus, but with annual inflation below 2% and an average of less than 1% for the current quarter, we maintain our view of a 25 basis point cut at the December meeting,” said Radhika Rao, executive director and senior economist at DBS Bank.
“The commentary will be balanced, to avoid a further hardening of bond yields after June.” Yields on 10-year benchmark bonds had fallen as much as 8 basis points this week after dovish comments from Reserve Bank of India Governor Sanjay Malhotra on Monday revived expectations for a December 5 rate cut. The RBI is expected to deliver a rate cut next week, according to a majority of economists polled by Reuters. However, they expect interest rates to remain stable until 2026.
The central bank already cut interest rates by 100 basis points in January and June, but has maintained the status quo since then.
Traders will also monitor demand at a debt auction on Friday, at which the central bank will sell bonds worth 320 billion rupees ($3.58 billion).
PRICES
Indian overnight index swap (OIS) yields rose in line with government bond yields and will respond to growth data on Friday.
The one-year OIS ended at 5.43%, while the two-year yield closed at 5.4175%. The five-year interest rate was 5.7025%.
($1 = 89.2870 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Rashmi Aich and Janane Venkatraman)
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