Mumbai: Bond yields fell to three-week lows on Monday, on substantial cash surplus in the banking system, although some profit-booking following sharp falls last week later lifted them off their troughs.
At 10:30am, the yield on the 10-year benchmark bond was at 6.68%, after hitting 6.62% in morning trade, its lowest since 24 March.
It had ended at 6.70% on Thursday. Markets were shut on Friday on account of Good Friday.
At the day’s low, the yield was down 39 basis points so far this month.
Volumes were an average Rs32.25 billion ($646 million) on the Reserve Bank of India’s trading platform with the 2019 bond being most traded.
“Last week’s auction results were good and there were no negative surprises over the weekend so market should gradually improve from this level as we approach monetary policy,” said Gopal Tripathi, a fixed income dealer at HDFC Bank.
The RBI is scheduled to hold its quarterly policy meet on 21 April and analysts say there is further room to cut key interest rates.
Banks parked Rs1.3 trillion with the apex bank through its reverse-repo auctions on Wednesday and Thursday, highlighting the excess cash in the market.
The banking system is awash with cash following a government bond redemption last week, lower lending by risk-averse banks and increased government spending.
After market hours on Thursday, the government announced an auction of Rs120 billion of bonds on 17 April. It plans to auction Rs2.4 trillion of bonds in the first half of the current fiscal year that began 1 April.