By Khushi Malhotra
MUMBAI, July 28 (Reuters) – Indian government bonds fell in early deals on Monday, as traders nervously sold debt ahead of rate decisions by the United States and Indian central banks, and as the market lacked fresh positive cues to spur buying.
The yield on the benchmark 10-year bond was at 6.3603% as of 10:35 a.m. IST, compared with Friday’s close of 6.3505% and up nearly 8 basis points since last week.
Bond yields move inversely to prices.
Indian bond yields continued to rise after Friday’s selloff, when Reserve Bank of India Governor Sanjay Malhotra’s commentary in an interview with the Financial Express trimmed rate cut bets in the market.
“Investors expecting an August rate cut are shedding positions after the Governor’s comments on Friday, so the selling pressure is expected to continue,” a trader at a state-run bank said.
“6.38% is a key technical level for the 10-year benchmark this week.”
Traders will closely eye any change in the RBI’s inflation and growth forecasts to gauge its interest rate trajectory, they said.
The RBI is set to announce its policy decision on August 6.
Focus is also on the US Federal Reserve’s policy decision, due on Wednesday, in which the central bank is widely expected to keep the rates unchanged, traders said.
US yields have also hurt sentiments in the domestic market.
The US 10-year bond yield was at 4.3899% in Asian hours, having risen nearly 6 basis points since last week.
RATES
India’s overnight index swap rates were unchanged in early trading, as market participants awaited further cues after a selloff on Friday.
The one-year OIS rate was at 5.53% and the two-year OIS rate was at 5.51%. The liquid five-year OIS rate was at 5.73%. (Reporting by Khushi Malhotra; Editing by Janane Venkatraman)
