Mumbai: Indian federal bond yields slipped to fresh 1-“ month lows on Tuesday, taking cues from lower US treasury yields and supported by easy cash in the banking system.
However, market participants said they would await details of the monetary policy review due at 11:15am before building positions.
At 9:56am, the yield on the 10-year benchmark bond was at 6.32%, off an early low of 6.29% which was its lowest since 5 March, and below Monday’s close of 6.39%.
Volumes were average at Rs42.25 billion ($836.6 million) on the Reserve Bank of India’s trading platform with the 2019 bond being the most traded.
Gopal Tripathi, a fixed income dealer at HDFC Bank, said the market was helped by a global rally in bonds but the monetary policy would set the direction.
Analysts are almost evenly split on the possibility of a rate cut at the policy meet.
The RBI, in a review of the economy, said on Monday the major drivers of growth in India are moderating and surveys of economic activity point towards less-than-optimistic sentiment for the economy in coming months.
Some dealers also said state-run banks were the major buyers in the market mainly because of replacement demand after debt redemptions this month.
Banks have parked Rs1 trillion of cash with the RBI’s reverse repo window for the past eight sessions, highlighting the surplus cash in the banking system.
US Treasury debt prices rallied on Monday as renewed worries about banking sector hammered Wall Street and spurred the appetite for bonds and other low risk-investments.