Indian government bonds climbed on Tuesday, reversing early session losses, as robust demand in the weekly state debt auction renewed optimism among investors. The upbeat sentiment came ahead of the Reserve Bank of India’s (RBI) borrowing plan announcement for the second half of the fiscal year.
The yield on India’s 10-year benchmark bond settled at 6.4729%, compared to 6.4885% in the previous session. Bond yields, which move in the opposite direction to prices, briefly crossed 6.50% during the day, sparking interest from bullish traders who wanted to position before any potential breach of the key 6.52% technical level.
Market mood improved significantly after the state debt sale, which saw healthy participation from investors.
“We saw some good demand from investors in today’s SDL auction as the cut-offs were better than expected,” said Umesh Tulsyan, Managing Director at Sovereign Global Markets.
Traders are also positioning themselves ahead of the RBI’s monetary policy meeting scheduled for October 1. While most market watchers believe the central bank will hold rates steady, many are anticipating softer guidance in the commentary.
According to traders, the market continues to price in the likelihood of at least a 25-basis-point rate cut later this year.
Earlier in June, the RBI delivered a 50-bps policy repo rate cut but adopted a neutral stance. In its August review, the central bank opted to keep policy unchanged, further fueling speculation over its next move.
With investor appetite strong and expectations of dovish signals from the RBI, bond markets are poised for heightened activity in the coming weeks.
India Bonds Rally as Strong State Debt Auction Spurs Investor Confidence
