2023-10-06 04:17:36
Indian government bond yields remained largely unchanged in early trading Friday as investors awaited the Indian Central Bank’s decision and guidance on inflation management and liquidity.
The yield on the benchmark 10-year bond 7.18% 2033 was at 7.2197% at 9:45 IST, after finishing at 7.2140% in the previous session.
India’s central bank is expected to keep its key interest rate at 6.50% on Friday, despite the recent rise in inflation.
“There is talk in the market that the RBI may choose to maintain tighter liquidity conditions,” said a trader at a major brokerage. “It is possible that it will not adopt a brutal measure, which leads to stable pre-political exchanges.
According to DBS, the RBI is expected to maintain its full-year growth and inflation projections at 6.5% and 5.4% respectively.
In August, the central bank had asked banks to maintain an additional cash reserve ratio (I-CRR) of 10% on the increase in certain deposits.
Since then, the liquidity of the banking system – the amount of money held by banks – has declined.
Although the I-CRR was phased out, its implementation led to an increase in effective rates.
“As the final stage of the I-CRR increase winds down, it is likely to be accompanied by one-off absorption measures,” said Radhika Rao, chief economist at DBS.
“Preference could be given to temporary pressures such as short-term buy/sell FX swaps or variable auctions, rather than a more lasting change in the CRR.
Meanwhile, U.S. Treasury yields stabilized after a sharp rise in recent days amid bets on higher long-term interest rates.
Operators are awaiting data on non-farm employment in the United States, due Friday.
The yield on U.S. 10-year bonds was around 4.70%, after hitting a more than 16-year high of 4.88% on Wednesday.
The benchmark Brent crude oil contract traded below $85 per barrel.
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