India bond yields seen steady ahead of central bank minutes
MUMBAI, April 23 (Reuters) – Indian government bond yields are expected to be little changed in early deals on Wednesday, as market participants await the minutes of the central bank’s latest meeting, while underlying sentiment remains favourable for the bulls.
The benchmark 10-year bond yield is likely to move between 6.30% and 6.34%, a trader at a private bank said, compared with its previous close of 6.3201%.
“The benchmark bond recovered all its losses yesterday before the end of the session and this goes to show the underlying strength in the market and the heavy bullish bias for debt,” the trader said.
The benchmark bond yield ended nearly unchanged on Monday, after staying higher for most of the session, tracking U.S. yields and some concerns over demand after the Reserve Bank of India’s final guidelines on liquidity management.
The RBI said banks will set a buffer rate of 2.5% on digitally accessible retail deposits – half the level announced in July. This could potentially impact the demand for government securities from lenders.
The minutes of the April monetary policy meeting are due after market hours. The RBI had cut the repo rate by 25 basis points for the second consecutive time and also changed policy stance to accommodative from neutral.
Traders will look for cues on the depth of the current easing cycle, with most now expecting a third consecutive rate cut in June.
The sentiment was also upbeat amid continuous open market bond purchases from the RBI, which has already bought notes worth 1 trillion rupees ($11.73 billion) so far in April and is scheduled to buy bonds worth 200 billion rupees next week.
India’s overnight index swap rates are expected to be rangebound after inching higher on Tuesday.
The one-year OIS rate posted its first uptick after declining for 14 straight sessions.
The two-year and five-year OIS rates have declined around 31 and 27 bps, respectively, so far in April. KEY INDICATORS: ** Brent crude futures were up 0.7% at $67.95 per barrel, after rising 1.8% in the previous session ** Ten-year U.S. Treasury yield at 4.3481%; two-year yield at 3.8216% ** RBI to auction treasury bills worth 190 billion rupees ** RBI to conduct 1-day variable rate repo auction for 1 trillion rupees ** RBI to detail minutes of latest policy meeting ($1 = 85.2370 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Eileen Soreng)
