India bond yields inch down on quarter-end buying; RBI policy key

Core Viewpoint - The Indian government bond market is experiencing stability in yields, with expectations of a potential interest rate cut by the Reserve Bank of India (RBI) in the near future, alongside a significant bond auction planned for the upcoming week [5][6]. Group 1: Bond Market Overview - The yield on the 10-year benchmark note was at 6.5483% as of 10:00 a.m. IST, down from 6.5547% in the previous session, indicating a slight easing in yields [6]. - A trader from a state-run bank anticipates that there will be no selling pressure, predicting that the benchmark will close around 6.53%-6.54% [6]. Group 2: Monetary Policy Expectations - A majority of respondents in a Reuters poll expect the RBI to maintain its key interest rate, although some firms, including Citi and Barclays, suggest a possible surprise cut [6]. - Madhavi Arora, chief economist at Emkay Global Financial, believes there are sufficient reasons for the RBI to ease rates by 25 basis points in October and adopt a more open-ended policy approach for future easing [2][6]. Group 3: Upcoming Bond Auction - India plans to auction a new 10-year government bond on Friday to raise 320 billion rupees ($3.61 billion), which will replace the existing benchmark paper [5][6]. - The government has increased the share of the 10-year bond in its borrowing plan for October-March to over 28%, while reducing the issuance of ultra-long 30-50-year notes [5][6]. - The total borrowing target for the government from October to March is set at 6.77 trillion rupees, following 7.95 trillion rupees raised from April to September [5]. Group 4: Overnight Index Swaps (OIS) - India's overnight index swaps (OIS) rates have decreased, with the one-year OIS rate at 5.4550%, the two-year at 5.45%, and the five-year OIS rate at 5.73% [6].