India’s benchmark 2036 government bond weakened Nov. 12 amid pressure from U.S. Treasuries and an approaching government auction, Reuters reported, while official data put October inflation above the RBI’s 6% ceiling.
Consumer prices rose 6.09% from a year earlier in October, according to provisional figures from India’s National Statistics Office (NSO), up from a final 5.54% in September. Food inflation was 8.94%. India’s inflation target is 4%, with a tolerance band of 2% to 6% through March 2031. Reuters reported that its poll forecast October inflation at 5.93%.
Reuters said the 6.94% GS 2036 closed at 7.2467%, 3.5 basis points higher than its previous close, after touching 7.2617% during the session. The Reserve Bank of India (RBI) scheduled a reissue auction of the bond for Nov. 13, with 34,000 crore rupees on offer and settlement set for Nov. 16. Under the auction notice, the Government of India may retain up to 2,000 crore rupees in additional subscriptions.
The U.S. Treasury’s daily data showed a 5.10% 10-year par yield on Nov. 12. Reuters separately reported that the 10-year yield tested 5% during Asian trading, an intraday observation.
At its Oct. 5-7 meeting, the RBI raised its repo rate by 25 basis points to 5.50% and adopted a “calibrated tightening” stance. Reuters reported that traders broadly expected another 25-basis-point increase in December, while some saw scope for a 50-basis-point move. DBS Bank Senior Economist Radhika Rao told Reuters that further oil-price declines could leave room for rates to ease, but a “deeper correction” looked unlikely with more rate hikes ahead.
The RBI’s next policy meeting is scheduled for Dec. 2-4, after the bond auction on Nov. 13.
