Indian government bond yields rose on Friday, with the benchmark yield posting its biggest weekly jump in over four months, as the Reserve Bank of India (RBI) kept the door open for yet another hike after raising interest rates during the week.
The benchmark 10-year yield ended at 7.3627%, after closing at 7.3432% on Thursday. The yield rose by eight basis points (bps) this week, the biggest such move since the week ended Sep. 23, 2022. It had dropped 11 bps last week.
The 10-year 7.26% 2033 bond yield ended at 7.3312%, up 9 bps for the week.
“The RBI kept its stance unchanged. (It) will wait for more data till April to get better clarity on inflation both locally and globally,” said Naveen Singh, head of trading at
Primary Dealership.
The central bank highlighted core inflation concerns with Wednesday’s 25-bps hike, its sixth consecutive hike. Another hike is possible in April, as inflation pressures persist and the U.S. Federal Reserve continues to tighten, analysts have said.
“The RBI is nowhere near the 4% inflation target. If the projection is not trending down by April, it can move one more time, or can call a pause if inflation is easing, said Singh.
Meanwhile, a continuous supply of debt weighed on sentiment at a time when banking system liquidity is tilting towards deficit. The RBI on Friday infused 500 billion rupees via 14-day repo, and analysts expect this tool to be used more often as the banking system is poised to move from surplus towards a more consistent deficit, they said.
Indian states raised nearly 720 billion rupees ($8.73 billion) over the last three weeks, while the central government raised 880 billion rupees through sovereign bond sale and 160 billion rupees through green bond issuance. ($1 = 82.4400 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman)
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