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India Bonds Little Changed Ahead Of RBI OMO Purchase

Thursday,   07-Mar-2019   10:17 AM (IST)

Indian government bonds were little changed in thin-volume early trade, as traders awaited fresh triggers while the central bank’s open market purchase of bonds today limited any major fall. The benchmark 7.17% bond maturing in 2028 was at 97.44 rupees at 10:00 a.m. in Mumbai today, yielding 7.57%, against at 97.43 rupees at close yesterday. The 7.26% 2029 bond was trading at 99.13 rupees, yielding 7.38% against 99.10 rupees and 7.39% yield at previous close. The Reserve Bank of India will conduct open market bond purchases worth 125 billion rupees today that will take the total quantum of such purchases to 2.86 trillion rupees. The RBI is also scheduled to undertake similar purchase worth 125 billion rupees next week. Many market participants doubt the continuation of such operations beyond the second week of March as the RBI is also infusing one trillion rupees via longer term repos. Bonds fell yesterday ahead of heavy debt supply this month. India will raise 120 billion rupees via sale of four bonds tomorrow and the auction includes 40 billion rupees of the 7.26% 2029 bond. The government will further raise 180 billion rupees each in the following two weeks, the highest quantum for a weekly auction since January 2018, raising doubts about investor appetite during the last month of the fiscal year. India also aims to raise 7.10 trillion rupees via bonds in the next fiscal year that starts Apr. 1. Bets of another rate cut also gained strength as the Indian economy grew 6.6% in October-December, the slowest pace since quarter ended June 2017, and against 7% growth in the previous quarter. India also cut its estimate for economic growth in this fiscal to 7.0% from previous estimate of 7.2%. India’s Monetary Policy Committee had unexpectedly cut rates by 25 basis points last month as it expected inflation to stay below target for the next year. Market awaits February retail inflation data that would be published on Mar. 12. Crude oil prices stayed elevated as production cut from OPEC outweighed increasing supply from U.S. The benchmark Brent crude oil contract was higher for fourth consecutive session and was last trading 0.5% higher at $66.29 per barrel. India imports 80% of its crude oil requirements.