Indian government bonds rose on Wednesday, with the benchmark yield breaching a key level early, on sustained investor optimism from rising rate cut bets and easing supply concerns.
The yield on the 10-year benchmark note was at 6.4930% as of 10:45 a.m. IST, after ending at 6.5101% on Tuesday.
Bond yields move inversely to prices.
Bond market bulls drove the 10-year yield below a stubborn 6.50% level, indicating broader positivity.
“Market has resumed buying after (the release of) the central bank policy and debt calendars, as tensions have eased,” a trader at a private bank said.
Earlier this month, Indian states released their quarterly debt calendar, with borrowing via bond sales pegged at 2.82 trillion rupees ($31.77 billion) in the October-December quarter, much lower than traders’ expectation of around 3.25 trillion rupees.
The upbeat sentiment was evident in Tuesday’s state auction demand, with the central bank policy’s dovish tone also providing a boost.
The Reserve Bank of India kept its policy rate unchanged on October 1, but lowered its inflation outlook, opening up doors for further rate cuts. Most market participants now expect the RBI to cut rates in December.
Falling U.S. Treasury yields also provided support. The 10-year U.S. Treasury yield was at 4.1229%, down for a second day.
Separately, traders will closely watch New Delhi’s weekly auction to gauge demand.
The RBI will sell 15-year and 40-year bonds worth a total of 280 billion rupees ($3.15 billion) on Friday.
KEY RATES
India’s longer-duration overnight index swaps (OIS) dipped in early trading, as traders priced in further rate cuts and amid falling U.S. Treasury yields.
The one-year OIS rate was steady at 5.41%, the two-year rate dipped about 2 bps to 5.34% and the five-year rate was also down 3 bps at 5.6075%.