The benchmark 10-year yield closed at 7.3646%, after ending at 7.3627% on Friday. The yield jumped 9 basis points (bps) last week, its biggest such move in more than four months. The Indian bond market timing has been restored to 9:00 a.m. IST to 5:00 p.m. IST from Feb. 13.
The market used to close at 3:30 p.m. until now, a tweak that was undertaken during the COVID-19 pandemic. "The bond market sentiment has been impacted after the monetary policy and the benchmark yield could move towards 7.40% soon," said Ajay Manglunia, managing director and head of investment grade group at JM Financial. "Core inflation is expected to remain sticky, even if headline number comes down and that is worrisome."
Higher food prices likely nudged up India's annual retail inflation last month from a 12-month low in December, but it stayed within the Reserve Bank of India's targeted range for the third consecutive month, a Reuters poll of economists predicted. The inflation rate is forecast to have risen to 5.9% in January from 5.72% in December.
It ran above the RBI's upper tolerance limit of 6% for the first 10 months of 2022, but fell below it in the last two, largely because of a fall in food inflation. The Reserve Bank of India (RBI) raised the repo rate by 25 bps last week for the sixth consecutive time and also left the door open to more tightening, highlighting core inflation concerns. "The stickiness of core or underlying inflation is a matter of concern. We need to see a decisive moderation in inflation," RBI Governor Shaktikanta Das said. Some analysts have also changed their call on the terminal repo rate and now expect the RBI to hike the repo rate by 25 bps in April, which will take it to 6.75%, a level last seen seven years ago. Bond yields were also impacted after the U.S. 10-year yield hit the 3.75%-mark for the first time in five weeks on Friday, as they expected more interest rate hikes after a strong economic data. (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
