INDIA BONDS-Bond yields were little changed as traders book profits after a rally

By Dharamraj Lalit Dhutia

MUMBAI, October 18 (Reuters)Indian government bond yields ended largely unchanged on Tuesday as traders took profits after a sharp rise in prices in the previous session and earlier in the day.

The benchmark 10-year Indian government bond yield IN072632G=CC finished at 7.4261%. It had fallen to the day’s low of 7.3639% after closing at 7.4075% on Monday, posting its biggest single-session decline since Oct. 4.

“We expect the 10-year benchmark bond yield to trade in a narrow range after the rally,” said Venkatakrishnan Srinivasan, founder and managing partner of debt advisory firm Rockfort Fincap. “The market now expects the MPC to raise its policy rate between 25 and 35 basis points in the next two meetings.”

Bond yields fell earlier in the session as the RBI in its monthly bulletin released late Monday said retail inflation is expected to decline from September levels, while economic activity is set to ease. grow.

“Headline inflation is expected to decline from its September high,” the RBI wrote in a post.

The comments came after minutes of the RBI’s latest Monetary Policy Committee (MPC) meeting showed a more dovish stance than expected, with one of the members suggesting the central bank take a break from trading. rate hikes.

The central bank should suspend rate hikes despite inflation being too high to avoid stalling the resumption of economic growth, MPC member Jayant Varma told Reuters on Monday.

The net impact of all central bank actions, including rate hikes, resulted in an increase of nearly 250 basis points, Varma said.

“That might be adequate. We don’t know because we started acting in April, the effects of which won’t be seen until early or mid-2023. So we have to let another quarter pass before we know if our medicine is work.”

The MPC had raised the repo rate by 50 basis points in September, the fourth consecutive increase to tame stubbornly high inflation. It has increased the repo rate by 190 basis points since May.

India’s retail inflation accelerated to a five-month high of 7.41% in September, a ninth straight reading above the 2%-6% target range.

(Reporting by Dharamraj Lalit Dhutia; Editing by Dhanya Ann Thoppil)

((Dharamrajlalit.dhutia@tr.com))

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