Indian bond yields rise on inflation worries, RBI Minutes Eyed

Indian bond yields rise on inflation worries, RBI Minutes Eyed

The yield on benchmark 10-year government bonds ended at 7.2639%, up two basis points.

Mumbai:

Government bond yields ended higher for the second consecutive session on Friday as the focus shifted back to inflation, while a new 10-year bond posted a higher-than-expected cut-off yield, indicating a low demand.

Market participants are now awaiting the minutes of the latest Reserve Bank of India policy meeting, due out later on Friday, which will provide more clarity on the central bank’s stance on the path of interest rates. .

The yield on benchmark 10-year government bonds ended at 7.2639%, up two basis points. The yield rose 6 basis points on Thursday to end at 7.2421%. However, the return was lower for the fifth consecutive week.

“The monetary policy committee may persist with rate hikes until real rates are in positive territory in the medium term, which could happen very soon,” said Kunal Sodhani, vice president of the global trading center of Shinhan Bank.

The RBI sold 130 billion rupees ($1.63 billion) of a new 10-year bond at a limit yield of 7.26%, against expectations of 7.23%, according to a Reuters survey of traders . The note slipped into the discount on its trading debut but ended at 100.05 rupees, yielding 7.2529%.

On Thursday, RBI said inflation may still require a monetary policy response as it remained above the target range despite falling in recent months.

“Inflation has eased slightly, but its persistence at high levels warrants appropriate policy responses to anchor expectations for the future,” the central bank said in an article on the state of the economy, published in its monthly newsletter.

Retail inflation in India fell to 6.71% in July, falling for the third consecutive month and missing the 6.78% forecast by economists in a Reuters poll. The RBI, however, expects inflation to average 6.7% in this financial year.

Earlier this month, the RBI’s monetary policy committee raised the bank’s key rate by 50 basis points to 5.40%, its third increase in four months to curb mounting price pressure. The RBI has raised the repo rate by 140 basis points since May.

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