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The yield on the benchmark 10-year note was at 6.5294% as of 10:35 a.m. IST. It settled at 6.5357% on Thursday.
Bond yields rise when prices fall.
In a slightly encouraging turn on Friday, Indian government bonds made a small recovery as traders scrambled to close short positions after a day marked by significant selling. Hopes for a possible US-India trade pact helped stabilize the market, reducing speculation around an urgent rate cut from the central bank.
Traders sold off debt in the previous session over expectations that India and the U.S. may strike a deal that lowers tariffs, dampening expectations of any imminent central bank rate cut, traders said.
A Reuters report on Thursday said that Indian refiners are likely to slash imports of Russian oil to comply with new U.S. sanctions, removing a major obstacle to a trade agreement.
Primary dealers resorted to short selling with net sale of 60.6 billion rupees ($689.46 million) on Thursday, but state-run lenders saw this as a good value proposition and net bought bonds worth 56.6 billion rupees – the most in nearly two months.A slight recovery in early trading showed that some market participants are still banking on for further monetary policy easing.”Even if a trade deal is brokered and growth remains resilient, there is still room for a rate cut as inflation remains benign,” a trader at a primary dealership said.
India’s central bank also noted in its monthly bulletin that flux in the global economy presents considerable challenges to the global macroeconomic outlook and the Indian economy is not immune.
RATES
India’s overnight index swap (OIS) rates dropped slightly as some traders resumed receiving after Thursday’s selloff.
The one-year OIS rate was down 1 bp at 5.4550%, while the two-year OIS rate fell 1.25 bps to 5.3950%. The five-year swap rate dipped 1.5 bps to 5.65%. ($1 = 87.8950 Indian rupees)
