“After the heavy selling in January, the yield curve has now stabilized as the Reserve Bank of India has provided ample liquidity through various instruments, which has reduced overnight levels and thereby created demand,” said Prashant Pimple, fixed income CIO at Baroda BNP Mutual Fund.
Indian states raised 394.50 billion rupees ($4.35 billion) through debt sales, more than their planned issuance quantity, at interest rates below market estimates for the second week in a row.
Government bond yields had risen in recent weeks on supply pressures but fell this month after the central bank reassured about easier liquidity.
The Indian banking system’s liquidity surplus averaged about 2.70 trillion rupees per day in February, more than 1% of deposits in the banking system.
U.S. Treasury yields continued their decline on Tuesday, with the 10-year yield falling to 4.03% from 4.0560% in Asian hours after retail inflation eased in January, adding to greater expectations for rate cuts later this year.Indian yields on shorter-term overnight interest rate swaps (OIS) saw little change, while long-term yields showed marginal yields after reaching a key level.
The one-year OIS rate ended at 5.505%, while the two-year rate closed at 5.615%. The five-year OIS interest rate was 6.0425%. ($1 = 90.6620 Indian Rupees)
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