On April 28, 2023, Indian government bond yields saw an uptick, continuing from last week’s trends. This shift comes amid anticipations for a potential issuance of a new 10-year bond as early as this week. Market observers noted that traders are unwinding their positions, contributing to the rise in yields.
Rising Yields Amid New Bond Expectations
At 11:45 a.m. IST, the benchmark 10-year bond yield climbed to 6.3910%, marking an increase of 2.5 basis points from the previous Friday. The yield had dipped below the significant level of 6.30% earlier in the week, reaching its lowest point since its debut in October 2022. A fixed income trader pointed out that the recent bond purchases may have been excessive, resulting in a necessary adjustment that is driving yields higher.
- Key Insights:
- The yield dropped nearly 30 basis points earlier this month.
- A new 10-year bond issuance is anticipated, adding pressure to current yields.
- The existing 10-year bond is set to mature in about 9.5 years, prompting traders to predict an upcoming issuance.
Market Movements and Future Outlook
After a robust rally in bond prices, traders are now experiencing some fatigue, leading to the current rise in yields. Another trader explained that they expect a phase of consolidation in yields, along with a slowdown in market activity. There’s a strong likelihood that the new 10-year bond could be issued by this Friday, which may stabilize the market.
Stable Overnight Index Swap Rates
In the realm of overnight index swap (OIS) rates, there was minimal movement as traders awaited clearer indications regarding the Reserve Bank of India’s ongoing rate cut cycle. The one-year OIS rate remained unchanged at 5.72%, while the five-year OIS rate stayed flat at 5.68%.
In summary, the Indian bond market is currently navigating through a period of adjustment with rising yields, driven by expectations of new bond issuances and the unwinding of prior positions, all while keeping a close eye on the central bank’s monetary policy.
