The yields on the new 10-year benchmark 6.10%-2031 bond ended marginally larger on Tuesday on provide issues, but any additional rise has been capped due to easing oil rates and fall in US Treasury yields, dealers stated. The 10-year bond ended marginally reduced than Friday’s closing.
However, the other bonds ended practically flat on Tuesday due to lack of fresh triggers as traders are waiting for the guidance of the central bank in the monetary policy. The most traded bond 5.63%-2026 and 6.64%-2035 bonds ended at 5.7336% and 6.8142%, respectively. “The market is on the backfoot due to uncertainty about the policy that what RBI will communicate on the inflation front. This communication will be a key driver for the market,” a fund manager with mid-sized fund property stated.
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Market participants anticipate that the Reserve Bank of India (RBI) will boost its inflation forecast soon after an unexpected rise in inflation to 6.30% in May from 4.23% in April and 6.26% in June. “In the upcoming policy we expect a status quo on rates and stance, the focus will be on the underlying tone of the RBI-MPC statement, given the increasing risks to inflation. For now, we expect the RBI to revise its inflation outlook trajectory by 30-50 bps across quarters,” stated Upasna Bhardwaj, senior vice president, Kotak Mahindra Bank stated in a report.
After industry hours on August 2, the central bank had announced weekly bond auction, which integrated a sale of 6.10%-2031 worth Rs 14,000 crore, of the total Rs 26,000 crore. It will also sell 4.26%-2023 and 6.76%-2061 bonds worth Rs 3,000 crore and Rs 9,000 crore, respectively.
On August 6, there will be an additional auction for the new 10-year benchmark 6.10%-2031 bonds. An earlier auction was carried out on July 9, exactly where the central bank set 6.10% yields and the second auction on July 23, which saw a big devolvement on Primary Dealers.
Any additional rise in yields have been capped by the fall in crude oil rates in the international industry on Tuesday. The Covid Delta variant, extensively spreading in big oil consuming nations, is placing stress on rates. By the closing of industry hours, Brent crude oil rates have been trading at $71.16 a barrel, down $1.73 or 2.37%, for the contract maturing in October.