India bond yields seen little changed before RBI minutes

India bond yields seen little changed before RBI minutes

Indian government bond yields are expected to trade largely flat in the early session on Thursday, as traders await minutes from the Reserve Bank of India‘s policy meeting due later in the day. The 10-year benchmark 7.26% 2032 bond yield is expected to be in the 7.20% to 7.25% range, after closing at 7.2251% in the previous session, a trader with a private bank said.

There is absolutely no trigger for yields to move in either direction, and hence they have been unable to break 7.20% on the downside and par level on the upside since the last couple of weeks, the trader said. The minutes from the Monetary Policy Committee meeting will come after market hours and will provide clarity on the central bank’s stance on interest rates.

India’s retail inflation for March was at 5.66%, falling below the RBI’s upper tolerance level of 6% for the first time in 2023 and the lowest since December 2021.Traders also said that bond yields are not falling due to selling pressure from state-run banks as they continue to book profits. These banks are likely to wait for government bond prices to drop before rebuilding positions.

Banks have been offloading notes over the past month to book profits, following a price rally led by hopes of a policy pivot by local and U.S. central banks, traders said. Meanwhile, the 10-year U.S. yield continues to trade around 3.60% levels as odds of a rate hike by the Federal Reserve on May 3 have risen to around 86%. The current target range is 4.75%-5.00%, up from near zero in March 2022.