“Underlying sentiment is bullish for bonds right now, and markets are anticipating further liquidity infusion from the central bank. Plus, there are rate cut expectations as well,” said a bond trader from a primary dealership.
Yields on the 10-year benchmark bond have been on a bullish trend for the past month, easing from 6.52% on April 2.
“Given the liquidity surge and the expected RBI dividend next month, a natural drag to 6.25% is almost certain. And if there is another cut in the repo rate, then 6%,” said Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.
The RBI is set to buy Rs 40,000 crore worth of bonds during the remainder of April and has already infused Rs 6.6 lakh crore through OMO purchases, foreign exchange swaps, and a cut in the cash reserve ratio.
Rupee Strength
The rupee touched an intraday high of 85.04—a level where the RBI likely absorbed dollars—before closing at 85.12/$1. The dollar index, meanwhile, was trading at a three-year low of 97.9 on Monday. The rupee had closed at 85.36 previously, according to LSEG data.
“We may see the rupee appreciate past 85 levels, towards 84.80/$1, as even though the RBI is absorbing dollars, it has allowed two-way moves in the rupee without much intervention,” said a currency trader from a private sector bank.
Meanwhile, dollar-rupee forward premiums fell, with the 1-year implied yield down 5 basis points at an over one-month low of 2.08%, according to Reuters.
