Indian bonds see an uptick today: Here we decode why

Indian bonds see an uptick today: Here we decode why

Indian bonds witnessed a surge today, following probable central bank purchases last week and a lower-than-expected state borrowing plan.

The benchmark 6.48% 2035 bond yield fell to 7.1149% at 11:00am IST from Thursday's close of 7.1329%.

This is the first decline after 12 consecutive sessions of an increase in yields.

Central bank support and lighter state borrowing calendar

Data from clearing houses revealed that a group of investors, including the Reserve Bank of India (RBI) and other long-term investors, net bought ₹96 billion worth of bonds in the secondary market on Thursday.

This was likely led by the central bank, traders said.

Meanwhile, states have announced plans to sell about ₹2.54 trillion worth of bonds between April-June, lower than the market expectation of ₹3 trillion.

Price rally could be difficult to sustain

A trader from a private bank said to Reuters, "Likely central bank support last week and a lighter state borrowing calendar improved sentiment and triggered some value buying."

However, they also warned that the price rally could be difficult to sustain due to the deteriorating Middle East conflict.

This uncertainty could keep investors cautious ahead of RBI's rate decision on Wednesday.

RBI to maintain neutral stance

RBI is tipped to keep rates unchanged and maintain its neutral stance at the upcoming meeting.

The market will be closely watching for comments on policy and liquidity outlook.

India's overnight index swap (OIS) rates fell as improved sentiment sparked receiving interest.

The one-year OIS rate fell by 10.25 bps to 6.27%, while the two-year rate fell by 8.75 bps to 6.4525%.