Bonds rose in the last two sessions on hopes of a rate cut after Reserve Bank of India Governor Sanjay Malhotra told local news media that recent macroeconomic data had not limited the room to cut rates.
Indian inflation fell to a record low of 0.25% in October. GDP data for July-September, due on Friday, is likely to show the economy grew by 7.3%, according to a Reuters poll.
The central bank cut the repo rate by 100 basis points to 5.5% between February and June, but has maintained interest rates since then. During the October meeting, Malhotra had said there is scope to cut the policy rate. The tariff panel will meet from December 3 to 5.
Traders see room for a further rally in bonds if the 10-year yield remains below 6.50%, which is likely to generate strong buying interest. “If the 10-year yield closes below 6.50%, we could see another rally of 5 to 7 basis points,” said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank. Strong bullish momentum in U.S. Treasuries is also supporting market sentiment, traders said. Ten-year U.S. Treasury yields have also fallen about 13 basis points over the past four sessions on hopes of U.S. rate cuts.
PRICES
India’s one-year index swap rate rose in the early deals after falling below a key level for the first time in seven weeks.
The one-year OIS rose 1 bp to 5.43%, while the two-year was not yet traded. The five-year period remained stable at 5.7050%. ($1 = 89.2050 Indian Rupees).
#Indian #bonds #cling #interest #rate #cut #hopes