India bonds inch up as RBI moves up debt buying after sell-off

The benchmark 10-year bond yield was at 6.7083% as of 11:00 a.m. IST. It ‌ended Tuesday’s ‌session at 6.7194%, its highest closing level in 11 months.

Bond yields move inversely to ‌prices.

The Reserve Bank of India on Tuesday said it has moved up its OMO timetable, and is now set to purchase 1 trillion rupees ($10.92 billion)of bonds in two tranches – on January 29 and February 5 – a week earlier than scheduled.
Traders, however, said the relief may be temporary as worries around excess supply ‌and expectations ‍of a larger borrowing plan for the next fiscal ‍year, starting April, keeps risk appetite in check.

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“The RBI ‌moved ahead the open market purchases, which triggered some short-covering, but further moves hinge on the federal budget now,” said a trader at a primary dealership. “A close below 6.70% on the 10-year paper is crucial for further easing.”
New Delhi will sell 320 billion rupees of the 6.48% 2035 bond on Friday, ahead ‍of the budget on Sunday. Most analysts expect FY27 borrowing of 16-17.5 trillion rupees, a record quantum for any ‍fiscal year.

Traders ⁠will also monitor ⁠the treasury bill auction scheduled for later in the day, amid rising short-term rates.

RATES

India’s overnight index swap rates eased in early trading, as the outlook on liquidity and overall sentiment improved after the RBI rescheduled OMOs.

The one-year OIS rate fell 2 bps to 5.58%, while the two-year was down 2 bps at 5.75%. The five-year OIS rate also eased 2 bps to 6.16%.

($1 = 91.6150 Indian rupees)