India, Jan 21 : Indian government bonds gained early on Wednesday as traders priced in expected support from the Reserve Bank of India’s (RBI) suspected secondary market purchases and the likelihood of additional open market buying.
The benchmark 10-year 6.48% 2035 bond yield traded at 6.6658% by 10:12 a.m. IST, slightly lower than Tuesday’s close of 6.6722%. Bond yields move inversely to prices.
Market participants are increasingly betting on RBI intervention as the central bank balances liquidity management with the need to bolster demand in a market with few natural buyers.
“The RBI is constantly weighing liquidity against intervention, as both the rupee and bonds require support to remain stable,” said a private-bank trader. “They are likely to continue open market purchases.”
The 10-year bond broke a four session losing streak on Tuesday, fueling speculation that RBI was actively buying in the secondary market to replenish holdings following 200 billion rupees of securities maturing earlier this month. Investors in the “others” category, which includes the RBI, bought bonds worth 35.5 billion rupees ($390 million) on a net basis, according to clearinghouse data.
The RBI is also scheduled to purchase 500 billion rupees of bonds on Thursday, the last tranche under its current schedule, and traders are hopeful of an additional round of open market buying.
Global factors also influenced Indian debt, with U.S. Treasury yields remaining elevated amid Japanese bond market turbulence and ongoing trade tensions between the U.S. and Europe, adding pressure to the Indian rupee and domestic bonds.
Rates Snapshot:
One-year overnight index swap (OIS) rate fell to 5.58%
Two-year swap rate declined 1 basis point to 5.69%
Five-year OIS rate remained flat at 6.0975%
($1 = 91.0460 Indian rupees)