Indian bond yields edge lower ahead of RBI debt purchase

MUMBAI, March 17 (Reuters) – Indian government bond yields ended marginally lower on Monday, as traders awaited the Reserve Bank of India’s debt purchase.

The benchmark 10-year yield closed at 6.6896%, compared with its previous close of 6.6967%.

The RBI is set to purchase bonds worth 500 billion rupees ($5.75 billion) on Tuesday, which is likely to be the last one of the financial year, traders said.

The central bank has already bought bonds worth 1.89 trillion rupees through the open market as well as secondary market purchases since the middle of January.

While the Fed is expected to keep its key policy rates unchanged, interest rate futures have priced in 65 bps of cuts in 2025, down from 75 bps early last week.

Barclays anticipates the Fed cutting rates by 50 basis points in 2025, with one 25 bps move each in June and September.

In the domestic market, traders are eyeing a rate cut from the RBI in April after February retail inflation cooled to 3.61%. A Reuters poll had pegged the reading at 3.98%.

Investors also expect the benchmark yield to inch lower due to growing expectations of a rate cut amid tepid economic growth and slower-than-expected inflation prints.

“The next few months could be volatile, but we anticipate a downward shift in the yield curve, driven by expectations of rate cuts in April and beyond, along with liquidity-enhancing measures from the RBI,” said Avnish Jain, fixed income head at Canara Robeco Mutual Fund.

“We expect the RBI to cut rates again by 25 basis points in April, with further rate cuts likely in the coming months as GDP growth shows signs of slowing.”

Jain added that the 10-year yield is forecast to stay within the 6.65%-6.75% range, while a potential market rally is also possible ahead of the April policy meeting. ($1 = 86.7740 Indian rupees) (Reporting by Khushi Malhotra; Editing by Janane Venkatraman)