Indian government bond yields are expected to open lower on Monday after local inflation print came well below the Reserve Bank of India’s (RBI) upper tolerance limit for the second consecutive month.
The 10-year benchmark 7.26% 2033 bond yield is expected to be in the 6.96%-7.02% range, a trader with a primary dealership said, after closing at 6.9938% in the previous session.
India’s annual retail inflation eased to an 18-month low in April at 4.7% as food prices eased. This was the lowest reading since October 2021, when it hit 4.48%, and also lower than Reuters’ forecast of 4.80%.
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“The optimism over CPI led to rally towards the end of Friday’s session and that may continue on Monday. The benchmark bond yield will, however, find strong support at 6.90% because RBI rate cuts are not in sight,” a dealer with state-run bank said.
The 10-year benchmark bond yield settled at the lowest closing level since April 7, 2022, on Friday.
The RBI, in April, had surprised the market with a status quo on rates, against the market expectations of a 25-basis points hike.
“Even as the RBI has not changed its monetary policy stance and indicated that this is a “tactical pause”, we do not see any risk of another rate increase,” YES Bank economists said in a note.
We do not also see a rate cut from the RBI soon. Effectively, we are calling for a long pause from the RBI.”
KEY INDICATORS: ** Brent crude futures down 0.5% at $73.78 per barrel after falling 1% in the previous session ** 10-year US Treasury yield at 3.4588% and two-year note yield at 3.9851% **India aims to switch securities worth up to 200 billion rupees ($2.45 billion) ($1 = 81.7800 Indian rupees)