Minutes of the Reserve Bank of India's (RBI) latest monetary policy meeting is due on Thursday and will provide more clarity on the central bank's stance on interest rates. The RBI had maintained a surprise status quo on policy rates against wide expectations of a 25-basis-point hike. A dip in inflation has now cemented bets of a prolonged pause by the central bank. India's retail inflation for March was at 5.66%, dipping below the RBI's upper tolerance level of 6% for the first time in 2023 and the lowest since December 2021. Bond yields had dipped on Tuesday on value purchase and demand speculations after HDFC's planned bond issue, traders said.
Meanwhile, the 10-year U.S. yield remained around the 3.60% level as the odds of a rate hike by the Federal Reserve on May 3 rose to around 86%. The current target range is 4.75%-5.00%, up from near zero in March 2022. Traders further awaited the central government's debt sale due on Friday. New Delhi will raise 330 billion rupees ($4.02 billion) through the sale of bonds, which includes the 7.26% 2033 bond that will soon replace the existing benchmark paper. Foreign investors have been raising positions in the 2033 paper after the central bank's surprise pause, and traders expect this trend to continue in the near term.
New Delhi will also raise 320 billion rupees through the
sale of Treasury bills later in the day.
(Reporting by Dharamraj Dhutia;
Editing by Sohini Goswami)
