This comes after the government raised 80 billion rupees through the sale of five-year and 10-year green bonds. "Since green bonds are also getting absorbed by local banks, it should have some impact on demand for the regular bond auction," a trader with a private bank said.
Citi, however, expects the benchmark bond yield to stay below the 7.40%-7.45% handle with a favourable supply dynamics in the final weeks of the financial year. The market has turned mildly bearish after the RBI raised the repo rate by 25 bps and surprised the market by leaving the door open to more tightening, saying core inflation remained high. The RBI raised the repo rate for the sixth consecutive time, on expected lines, but said the policy stance would remain focused on the withdrawal of accommodation, with four of the six Monetary Policy Committee members voting in its favour. Most analysts had expected this hike to be the final one in the RBI's current tightening cycle. The RBI is likely to raise interest rates once again in April as inflation pressures persist and the U.S. Federal Reserve continues to tighten, analysts said on Thursday.
The RBI has raised rates to 250 bps in the current fiscal. ($1 = 82.5250 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
