By Bhakti Tambe and Dharamraj Dhutia
MUMBAI (Reuters) – Indian government bond yields ended marginally lower in thin trading on Wednesday, as market participants await the minutes of the Reserve Bank of India’s (RBI) latest monetary policy meeting due later in the day.
The benchmark 10-year yield ended at 7.2867%, after closing at 7.2991% on Tuesday.
“Benchmark yield around 7.30% is not providing any direction. Any rise attracts value buyers such as banks, which curbs further rise,” said Pawan Somani, head of fixed income at Knight Fintech Research.
“We are expecting the yields to move in the range of 7.25% to 7.30% till month-end,” he added.
During the day, the yields moved in a narrow range as traders refrained from placing large bets ahead of the quarter-end. Foreign participants have also been staying away ahead of the calendar year-end.
Bonds worth around 205 billion rupees ($2.48 billion) were traded till 3:30 p.m. IST, against a daily average of 319 billion rupees so far in December.
Earlier this month, the RBI raised the repo rate by 35 basis points (bps), after three back-to-back hikes of 50 bps each, but had highlighted inflation concerns. The RBI has raised rates by 225 bps this year to 6.25%.
India’s retail inflation eased to 5.88% in November, its first reading below the RBI’s 6% upper tolerance level in 2022. But core inflation remains sticky, leading to expectations of another rate hike in February.
The central bank is mandated to keep inflation at 4% over the medium term, within a comfort band of 2% on either side.
It has reiterated its commitment to tame inflation multiple times, so it would be interesting to see comments from policymakers on the same, a dealer at a primary dealership said.
“The minutes will help the market gauge the trajectory of future rate hikes, even though a majority now expect only one small hike in February,” they added.
($1 = 82.7700 Indian rupees)
(Reporting by Bhakti Tambe and Dharamraj Dhuti; Editing by Janane Venkatraman)
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