The benchmark 10-year yield ended at 7.3102%, after closing higher at 7.3197% on Monday. The 10-year 7.26% 2033 bond yield ended at 7.2763%.
"The Monetary Policy Committee (MPC) may decide to keep the current policy rates unchanged on Wednesday. The recent rate hikes may need time to play out," said Churchil Bhatt, an executive vice president of debt investments at Kotak Life Insurance.
"The MPC may retire the current stance of 'withdrawal of accommodation,' which was used to characterise a specific, post-pandemic normalization. Real rates are positive and banking system liquidity too has normalized." The RBI is likely to raise key interest rate by 25 basis points (bps) to 6.50%, a Reuters poll of economists showed. More than three-quarters of economists, 40 of 52, expected the 25-bps raise, according to the poll conducted between Jan. 13-27. The remaining 12 predicted no change at the meeting. The central bank has raised the repo rate by 225 bps since May to 6.25% in its effort to tame inflation. The retail inflation data for January is due on Monday, and Barclays expects a third consecutive reading of below 6%. The RBI aims to maintain inflation in the 2%-6% band. Indian bond yields did not react much even as their U.S. peers jumped.
The 10-year U.S. yield rose 23 bps and the two-year yield , a closer indication of interest rate expectations, climbed 37 bps in the last two sessions, as strong economic data bolstered expectations that the Federal Reserve's will continue hiking interest rate. Traders also await heavy supply towards the end of this week after absorbing over 200 billion rupees ($2.42 billion) of state debt earlier in the day.
The central government will raise 80 billion rupees through
green bonds on Thursday, and 300 billion rupees through
securities on Friday.
($1 = 82.6620 Indian rupees)
(Reporting by Dharamraj Dhutia
Editing by Eileen Soreng)
