By Bhakti Tambe
MUMBAI, Feb 8 (Reuters) – Indian government bond yields ended marginally higher on Thursday as the focus shifted to a fresh supply of debt after the Reserve Bank of India (RBI) kept rates and stance unchanged, as expected, without providing major dovish guidance.
India’s benchmark 10-year yield IN071833G=CC ended at 7.0789%, following its previous close of 7.0723%.
“Bond yields had already eased in the last few days in the prelude to policy announcement and after a very brief spell of disappointment, held on to recent gains with yields largely unchanged,” Mahendra Jajoo, fixed income chief investment officer at Mirae Asset Investment Managers, said.
India’s key repo rate was left unchanged for a sixth straight meeting at 6.5% as inflation remained above the RBI’s 4% medium-term target and economic growth continued to be resilient.
Government bond yields and overnight index swap rates rose earlier in the day after the central bank’s policy announcement.
The RBI has maintained a status quo on policy rates even as major global central banks have begun to turn dovish and the inflation trajectory indicated comfort in view of the prevailing geopolitical uncertainties and high volatility in inflation prints, Jajoo added.
The central bank, which had been infusing liquidity in December-January, shifted towards aggressive withdrawal in February amid a pick-up in inflows from government spending.
Liquidity is being driven by exogenous factors which will correct in the foreseeable future, said RBI Governor Shaktikanta Das while announcing the policy decision.
Traders now await fresh debt supply via the weekly auction on Friday. New Delhi will aim to raise 330 billion rupees ($3.98 billion) through the sale of bonds and the auction includes 160 billion rupees of benchmark.
Meanwhile, the 10-year U.S. yield US10YT=RR continued to hover around 4.10%, while the odds of a rate cut by the Federal Reserve in May have declined to around 64% from 95% last week. FEDWATCH
($1 = 82.9540 Indian rupees)
(Reporting by Bhakti Tambe; Editing by Sohini Goswami)
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