India bonds advance as traders build positions for another rate cut
ADVERTISEMENT The yield on the benchmark 10-year bond was at 6.2965% as of 10:30 a.m. IST, compared with Friday's close at 6.3058%.
Bond yields move inversely to prices.
"Some foreign banks have started betting on an August rate cut, and are on the buy side, so we may see a further rally if they continue building positions," a trader at a private bank said. "Some selling pressure from mutual funds and state-run banks can offset the gains during the day." Foreign banks net bought bonds worth over 101 billion rupees ($1.17 billion) last week, while mutual funds net sold 77 billion rupees worth of bonds. State-run banks also sold in the last two sessions, data from The Clearing Corporation of India showed.
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The Reserve Bank of India's monetary policy decision is due on August 6. The central bank slashed its key interest rate by 50 basis points last month, while changing its stance to "neutral" from "accommodative".
India's retail inflation rate slipped to 2.10% in June, the slowest pace in more than six years, down from 2.82% in May.
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"With the inflation trajectory likely to undershoot RBI's medium-term target of 4% through the whole of FY2026, we see room for monetary easing emerging earlier than expected," Kotak Mahindra Bank said in a note, flagging potential for up to two more rate cuts before the end of 2025. RATES
ADVERTISEMENT India's overnight index swap rates saw moderate receiving pressure from rate cut wagers piling up, traders said, but short-end rates were largely unchanged in early trades.
The one-year OIS rate was at 5.49% and the two-year OIS rate was flat at 5.47%. The liquid five-year dropped 1 basis point to 5.68%.
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