Indias 10-year bond yield falls ahead of central banks debt purchase

By Khushi Malhotra and Dharamraj Dhutia

MUMBAI, April 21 (Reuters) -

Indian government bond yields fell sharply on Monday as underlying sentiment remained bullish, with markets anticipating further liquidity infusion from the central bank as well as rate cuts.

The benchmark 10-year yield ended at 6.3164%, compared with its previous close of 6.3709%, and its lowest since November 9, 2021.

"We expect further 50 basis points (bps) of rate cuts along with liquidity measures as and when required to maintain surplus," said Ketan Parikh, head of fixed income at ICICI Prudential Life Insurance.

"With a view of terminal rate at 5.50%, we expect the 10-year government bond yield to trend lower towards 6.25%."

The Reserve Bank of India is set to buy 200 billion rupees ($2.35 billion) worth of bonds on Tuesday, followed by a similar quantum of purchase next week.

The RBI has infused 5.81 trillion rupees through debt purchases as well as foreign exchange swaps since the start of 2025.

Earlier this month, the central bank reduced the repo rate by 25 basis points to 6.00% and also changed its stance to "accommodative" from "neutral".

Positive moves in the local currency is also boosting investor sentiment, traders said. The Indian rupee climbed 0.3% on Monday, which supported the downside in the bond yields.

RATES

India's overnight index swap rates also plunged as receiving bias persisted throughout the day, especially from foreign banks as continued liquidity injection along with favourable bets of rate cuts in India and the United States.

The one-year OIS rate fell 4 bps, while the two-year rate eased 4 bps and the five-year rates declined 5 bps.

For the month, the swap rates are down by around 30-35 bps. ($1 = 85.0940 Indian rupees) (Reporting by Khushi Malhotra and Dharamraj Dhutia; Editing by Varun H K)