Mumbai: Indian federal bonds gained on Friday, 2 May, extending this week’s sharp rally after the Reserve Bank of India held policy rates steady and oil prices fell from record highs.
The RBI said on Tuesday it was raising the cash reserve ratio (CRR) by 25 basis points to 8.25%, its highest in 7 years, to suck inflation-stoking cash from the system, but left its short-term lending rate unchanged.
At 10:10am, the 10-year bond yield was at 7.88%, compared with Wednesday’s close of 7.92%. Markets were closed on Thursday for a holiday.
The 10-year yield has fallen 27 basis points since Friday.
“Since the RBI had not touched the rates there is a kind of confidence that they will manage the situation through CRR in coming months,” a dealer with a private sector bank said.
“However, to me it looks like it is a bit overdone,” he said.
Traders said they would take their cues from the latest inflation data, due at noon (0630 GMT) on Friday, and details of government bonds to be auctioned next week.
The government is scheduled to auction Rs100 billion ($2.5 billion) of bonds between 2-9 May.