Bond yields rise when prices fall.
The RBI bought bonds worth 500 billion rupees ($5.53 billion) at higher-than-expected prices, pushing up bonds on the secondary market. Next Thursday, the country will buy bonds worth another 500 billion rupees.
The market is also hopeful that the RBI may include a 10-year 6.33% 2035 bond in the open market operations (OMO) next week.
The average excess liquidity in the Indian banking system so far this week was about 1.67 trillion rupees, up from 2.25 trillion rupees ($24.96 billion) last week.
“Liquidity is expected to remain stable in the first half of December, although it is expected to tighten incrementally due to tax outflows,” said Puneet Pal, head of fixed income at PGIM India Mutual Fund. “The market expects the RBI to make OMO purchases of Rs 2 trillion during the rest of FY26.”
The RBI has made record debt purchases worth Rs 3.16 trillion this fiscal.
In addition, the Fed cut rates by 25 basis points on Wednesday, causing US Treasury yields to fall and boosting sentiment worldwide.
Yields on 10-year US government bonds fell 4 basis points to 4.1468%, trading lower in Asian hours.
PRICES
Overnight index swap yields in India fell, following US government bond yields and as demand for government bonds revived after the Federal Reserve cut its key interest rate.
The one-year OIS rate fell 1.25 basis points to 5.4650% and the two-year swap fell 1.75 basis points to 5.56%. The five-year OIS interest rate stood at 5.92%, a decrease of 3.75 basis points. ($1 = 89.8480 Indian Rupees)
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