India bond yields may extend decline as dovish bets build up before RBI decision
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Indian government bond yields are expected to continue their declining trend in early deals on Tuesday, as market participants bet on a supportive decision and commentary from the central bank on Wednesday.The yield on the benchmark 10-year bond is likely to move between 6.28% and 6.33%, a trader at a private bank said, after closing at 6.3179% on Monday."Bulls will try their best to breach the 6.30% mark today, as voices for another interest rate cut are growing, even as the majority remains in the status quo camp," the trader said.The Reserve Bank of India is expected to keep rates unchanged in its upcoming monetary policy decision, according to a majority of the economists polled by Reuters Some market participants have still been laying bets on a rate cut, as June retail inflation dropped to a more than six-year low and July inflation is expected to hit a record low.The central bank changed its stance to "neutral" while cutting the benchmark rate by 50 basis points at its last meeting in June.The consensus view of no rate cut seems driven more by the RBI's June policy guidance than by current macro realities, Emkay Global economist Madhavi Arora said."However, we believe there are enough reasons for the RBI to depart from its last guidance, deliver further 25 bps easing in August and adopt an open-ended policy approach/guidance for more easing ahead."The 10-year U.S. Treasury yield also carried on with its downtrend as bets of a September rate cut kept on rising. RATES India's overnight index swap rates are expected to see continued receiving interest on optimism of a dovish monetary policy decision.The one-year OIS rate ended at 5.45% and the two-year OIS rate dropped to 5.4050%. The liquid five-year OIS rate ended at 5.64%. KEY INDICATORS: ** Benchmark Brent crude futures down 0.1% to $68.70 per barrel after easing 1.3% in previous session ** Ten-year U.S. Treasury yield at 4.1982%; two-year yield at 3.6937% ** Indian states aim to raise 271 billion rupees ($3.09 billion) via sale of bonds ($1 = 87.6700 Indian rupees).
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