India Bond Yields Flat, Benchmark Yield Dips Ahead Of MPC Minutes

Wednesday,   18-May-2022   01:28 PM (IST)

Indian federal government bond yields were largely unchanged, while the benchmark yield was a tad lower amid short-covering ahead of the release of minutes of the Monetary Policy Committee’s unscheduled meeting held earlier this month. The benchmark 6.54% bond maturing in 2032 was at 94.42 rupees, yielding 7.35%, as of 1:00 p.m. in Mumbai against 94.35 rupees, yielding 7.37%, yesterday. The Indian rupee was at 77.55 to the dollar from 77.57 in the previous session. The central bank-led-MPC, in an unscheduled meeting earlier this month, raised the key interest rate by 40 basis points to 4.40% as it focuses on calming inflationary pressures, while also increasing banks' cash reserve ratio by 50 basis points to 4.50%, which will be effective from May 21. India’s retail inflation stood at 7.79% and quickened at the fastest pace in about eight years through April, with the print hovering above the central bank’s 6% tolerance ceiling for a fourth straight month. The Indian benchmark bond yield has risen by over 20 basis points in a volatile month so far, but is unlikely to test 8.00% and may peak around 7.75% in the near term as the central bank may pause monetary policy tightening after raising the repo rate by another 75 basis points, Marzban Irani, CIO Fixed Income, LIC Mutual Fund Asset Management, told NewsRise today. Inflation risks have become more accentuated in recent months, while risks stemming from global developments have thwarted the momentum of a ‘resilient recovery’ in the Indian economy, the Reserve Bank of India said yesterday. The benchmark Brent crude oil contract was 0.7% higher at $112.75 per barrel amid hopes of a fuel demand recovery in China as it laid out plans to ease Covid restrictions. India imports nearly 85% of its crude oil requirements.