Updated February 8th, 2024 at 08:41 IST
Bond yields poised to decline ahead of RBI's policy decision today
With the Fed maintains a non-committal stance on policy adjustments, the RBI is likely to refrain from a preemptive dovish shift.
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Bond yields today: Government bond yields are anticipated to start the day on a downward trajectory on Thursday, as traders gear up for the Reserve Bank of India's final monetary policy decision of the current financial year with a bullish outlook.
The benchmark 10-year yield IN071833G=CC is projected to fluctuate within the 7.05 per cent-7.09 per cent range leading up to the policy announcement scheduled for 10:00 am, stated a trader from a primary dealership, following its previous close at 7.0723 per cent.
"Anticipation around interest rate adjustments is low, with only a few harboring optimistic expectations for a change in stance. The focus for today's policy will primarily be on liquidity management, a significant factor as we approach the end of the financial year," highlighted the trader.
As per a Reuters poll, the RBI is expected to maintain its key interest rate unchanged, while attention will be directed towards policymakers' commentary amid easing inflationary pressures and a financially responsible federal budget announcement last week.
Guidance on banking system liquidity assumes importance, especially after the central bank's recent moves to withdraw cash from the banking system, including two separate overnight variable rate reverse repo auctions conducted in the last two sessions following four-day VRRRs earlier.
With the Federal Reserve maintaining a non-committal stance on policy adjustments, the RBI is likely to refrain from a preemptive dovish shift, with inflation and growth projections for the current financial year expected to remain unchanged, as suggested by DBS.
Following the policy announcement, traders will eagerly await fresh debt supply via the weekly auction on Friday, where the central bank aims to raise 330 billion rupees ($3.98 billion) through the sale of bonds, including the benchmark bond.
Additionally, traders are keeping a close watch on US Treasury yields, which have shown slight divergence compared to their Indian counterparts amid a reassessment of Fed rate cut expectations.
The 10-year US yield US10YT=RR stood at around 4.10 per cent, while the likelihood of a Fed rate cut in May has decreased to approximately 64 per cent from 95 per cent reported last week, according to FEDWATCH.
- Brent crude futures LCOc1 rose by 0.3 per cent to $79.50 per barrel, following a 0.8 per cent increase in the previous session.
- 10-year US Treasury yield US10YT=RR at 4.0941 per cent, two-year yield US2YT=RR at 4.4162 per cent.
- RBI's monetary policy decision announcement.
(With Reuters inputs.)
Published February 8th, 2024 at 08:41 IST