By Bhakti Tambe
MUMBAI, April 10 (Reuters) - Indian government bond
yields edged higher on Monday as traders continued to book
profits after the Reserve Bank of India's rate pause, though the
benchmark bond yield remained near its lowest level in over four
months.
The 10-year benchmark 7.26% 2032 bond yield ended at 7.2313% after closing at 7.2120% on Thursday, which was
its lowest since December 1. Indian markets were closed on
Friday for a public holiday.
"Profit booking by banks and rise in U.S. yields are keeping
yield in a very tight range, giving very little scope for yields
to move sharply on either side," said a dealer with a
state-owned bank.
Banks, especially state-run lenders, have been booking
profit since Thursday, after the RBI in a surprise move
maintained status quo on the repo rate at 6.50%, following six
consecutive hikes.
These banks net sold bonds worth 107.58 billion rupees
($1.31 billion) on Thursday, their biggest single session sale
in three years.
U.S. yields rose after strong economic data raised bets of
another rate hike by the Federal Reserve in May. The 10-year
U.S. yield was at 3.36%, up seven basis points from its previous
close.
Bond yields plunged on Thursday after the RBI's rate
decision. Most market participants now expect a prolonged pause,
even though RBI Governor Shaktikanta Das said the Thursday's
decision was "a pause and not a pivot."
"Going ahead, the market will focus on RBI's liquidity
management and global yield movements," said Puneet Pal,
head-fixed income at PGIM India Mutual Fund.
Meanwhile, the overnight indexed swap rates are pricing in
interest rate cuts by the RBI before the end of 2023. Nomura
expects the RBI to cuts rate by 75 bps in October-March period.
"Supply pressure can negate any meaningful downside in
yields. We expect the steepening bias to continue over the next
one quarter," Pal added.
($1 = 81.9470 Indian rupees)
(Reporting by Bhakti Tambe; Editing by Varun H K)
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