scorecardresearchIndian bond yields seen higher on demand concerns, RBI rate hike

Indian bond yields seen higher on demand concerns, RBI rate hike

Updated: 03 Oct 2022, 08:13 AM IST
TL;DR.
The benchmark Indian 10-year government bond yield is seen in a 7.37%-7.42% band, a trader with a private bank said. The yield ended at 7.3984% on Friday. It fell five basis points in July-September, posting its first quarterly drop after rising 140 bps in last four quarters.
RBI data showed bank credit registered a growth of 8.7 percent year-on-year (YoY) as of 11 March.

RBI data showed bank credit registered a growth of 8.7 percent year-on-year (YoY) as of 11 March.

(Reuters) - Indian government bond yields are expected to open higher on Monday, as concerns over debt supplies may resurface after weaker-than-expected demand at a debt auction on Friday, while sentiment is seen under pressure after policy rate hike.

The benchmark Indian 10-year government bond yield is seen in a 7.37%-7.42% band, a trader with a private bank said. The yield ended at 7.3984% on Friday. It fell five basis points in July-September, posting its first quarterly drop after rising 140 bps in last four quarters.

"Since Friday was the quarter-end, the sell-off was controlled, but we may see some bearish bets in today's trading, which will show the real impact of recent developments," the trader said.

New Delhi raised 330 billion Indian rupees ($4.05 billion) via sale of bonds on Friday at higher-than-expected cut-off yields.

However, the federal government cut its gross borrowing to 14.21 trillion Indian rupees from 14.31 trillion rupees for this year, and aims to borrow 5.92 trillion rupees during October-March, compared with 8.29 trillion rupees in the first half of the fiscal year.

Supplies during October-March would also include 160 billion rupees of green bonds.

Meanwhile, the Reserve Bank of India raised benchmark repo rate by 50 basis points on Friday, the fourth straight increase in the current cycle, as policymakers extended their battle to tame stubbornly above-target retail inflation rate.

The RBI has now raised interest rates by a total of 190 basis points since its first unscheduled mid-meeting hike in May, but inflation remains sticky – a phenomenon that is affecting much of the global economy. Nomura and IDFC First Bank now expect the central bank to hike rates by 35 bps in December and a final 25 bps in February to take the terminal repo rate to 6.50%.

First Published: 03 Oct 2022, 08:13 AM IST