RBI rate-cut bets drive In­dian Bond yields to low­est

The Pak Banker - - COMPANIES/BOSS -

In­dian bonds ral­lied, push­ing the 10-year yield to the low­est since July 2013, as the govern­ment's de­ci­sion to cut rates on small sav­ings plans was seen paving the way for the cen­tral bank to fur­ther ease mon­e­tary pol­icy. The move by Prime Min­is­ter Naren­dra Modi seeks to ad­dress con­cerns that higher rates on govern­ment sav­ings plans can­ni­bal­ize de­posits in the bank­ing sys­tem and have pre­vented lenders from pass­ing on last year's 125-ba­sis point re­duc­tion in Re­serve Bank of In­dia's bench­mark re­pur­chase rate.

RBI Gov­er­nor Raghu­ram Ra­jan, who next re­views rates on April 5, has been urg­ing banks to ac­cel­er­ate trans­mis­sion.

The yield on notes due Jan­uary 2026 dropped three ba­sis points to 7.49 per­cent as of 11:51 a.m. in Mum­bai, ac­cord­ing to prices from the RBI's trad­ing sys­tem, headed for the low­est close for a bench­mark 10year note since July 2013. The yield has fallen 29 ba­sis points in a rally that be­gan with the govern­ment's Feb. 29 bud­get de­ci­sion to stick to its tar­get of nar­row­ing the fis­cal deficit to a nine-year low.

"What's driv­ing the mar­kets is ex­pec­ta­tions that lower sav­ings rates will boost pol­icy trans­mis­sion and pave the way for fur­ther RBI eas­ing," said Ajay Man­glu­nia, Mum­bai-based head of fixed in­come at Edelweiss Fi­nan­cial Ser­vices Ltd. "The drop in bond yields points to a softer in­ter­est-rate regime in com­ing months."

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