India bonds poised to rally on signs of RBI support in market
The benchmark 10-year yield was at 6.5178% as of 10:00 a.m. IST, after ending at 6.5279% on Tuesday, having earlier touched 6.4984%, its lowest since Oct. 23.
Markets were closed on Wednesday for a local holiday.
Investors from a category which includes companies, insurers, the central bank and pension funds bought nearly 50 billion rupees ($568.8 million) of bonds on Tuesday, after 40 billion rupees of purchases on Monday, clearing house data showed.
These investors, categorised as “others” by the central bank, have been steadily adding to positions amid improving sentiment.
“Everyone wanted the central bank to come out and support, and that is finally happening,” trader with a primary dealership said. “Once the profit taking from state-run banks goes down, we could see benchmark yield below 6.50%.” At a meeting with the central bank on Tuesday, traders urged the RBI to step in to buy government debt and tweak the auction rules to ease pressure on the bond market, Reuters reported citing three sources.
Traders now await fresh debt supply on Friday, wherein New Delhi will sell the new 10-year 6.48% 2035 bond worth 320 billion rupees which would be its second auction. This bond will replace the existing benchmark paper in the coming weeks.
RATES
India’s overnight index swap rates moved higher, tracking a spike in U.S. Treasury yields.
The one-year OIS rate was at 5.49% and the two-year rate was at 5.45%. The five-year swap rate inched up to 5.71% ($1 = 88.6550 Indian rupees).
