India's 10-year bond yield glued to 6.68%; bond purchase outcome eyed

Indian government bond yields dipped in early trades on Thursday, but the benchmark bond yield was largely unchanged as investors focussed on the outcome of the central bank's first debt purchase under its mega liquidity package.

The 10-year bond yield was at 6.6814% as of 9:45 a.m. IST, compared with the previous close of 6.6860%.

The Reserve Bank of India aims to buy bonds worth up to 200 billion rupees ($2.31 billion), including the benchmark.


This would mark the start of the RBI's durable liquidity infusion package, through which it aims to inject around 1.50 trillion rupees into the banking system over three weeks.

"The impact of the announcements is already behind us, and now the market will react to the actual action, starting from the treatment of the benchmark paper by the RBI at today's OMO (open market operation)," a trader with a primary dealership said.

The bond purchase will be followed by a dollar/rupee buy/sell swap worth $5 billion on Friday and a 56-day variable rate repo on Feb. 7.

The RBI will also conduct two more debt purchases each worth 200 billion rupees on Feb. 13 and Feb. 20.

Analysts have said these measures could be a precursor to a rate cut.

Investors also await India's federal budget, due on Saturday, and the RBI's monetary policy decision on Feb. 7.

Economists in a Reuters poll expect New Delhi to stick to fiscal deficit target of 4.5% of gross domestic product, with gross borrowing forecast at 14.28 trillion rupees.

The Federal Reserve held interest rates steady on Wednesday and Chair Jerome Powell said there would be no rush to cut them again until inflation and jobs data made it appropriate, an outcome which was largely in line with estimates. ($1 = 86.5690 Indian rupees)