Indian government bonds experience a decline following the previous week's surge.
In the world of finance, India's OIS rates have taken a downward turn, with traders expecting this trend to persist until the Reserve Bank of India (RBI) indicates further rate easing. This development comes amidst a host of other financial movements in the country.
Last week, the yield on the 10-year benchmark Indian government bond fell by 13 basis points, settling at 6.4942% on Tuesday. The five-year OIS rate ended 1 basis point lower at 5.7025%, while the two-year OIS rate remained relatively stable at 5.45%. The one-year OIS rate saw a slight decrease to 5.48%.
The fall in OIS rates coincides with an uptick in inflation. According to recent data, India's inflation likely rose to 2.1% in August, a rise from 1.55% in July. The "base effect" is fading in August's inflation data, and food prices are on the rise.
Despite these inflationary pressures, the bond market appetite revived last week due to smaller-than-expected revenue loss from the government's consumption tax cuts. This revival was evident in a debt sale on Tuesday, where Indian states raised 149 billion rupees, although this was below the targeted 153 billion rupees.
The Finance Minister, Nirmala Sitharaman, played a significant role in assuaging fears of fiscal slippage and heavier debt supply last week. In her remarks, she stated that the government's cash calendar will remain unchanged and expressed confidence in achieving the financial year's target. Sitharaman also told local media on Monday that the government will leave its borrowing calendar unchanged.
The market was shut on Monday, but on Tuesday, several top lenders chose to stay on the sidelines as they neared internal limits for such investments in the debt sale. Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank, noted a resistance near 6.43%-6.44% levels on the 10-year bond yield.
Looking ahead, key India and U.S. inflation data are due later this week. These upcoming figures will provide valuable insights into the current state and future direction of the Indian and global economies.
