Indian bonds gain ahead of RBI’s open market operation

The Indian government bonds gained Thursday as investors demand increased ahead of the Reserve Bank of India open market operation (OMO).

The yield on the benchmark 10-year bonds, which moves inversely to its price, fell 2 basis points to 7.083 percent, the yield on super-long 30-year bond also dipped 4 basis points to 7.225 percent and the short-term 3-year note yield slid 1/2 basis point to 6.900 percent by 07:10 GMT.

According to Reuters, the central bank will buy up to 100 billion rupees of five bonds later today, which will include securities maturing from 2020 to 2036, as it seeks to keep the banking system liquidity close to neutral. The monetary authority has bought bonds worth 805 billion rupees since April 1.

On Tuesday, the Reserve Bank of India Governor Raghuram Rajan delivered no surprises in its last monetary policy meeting while keeping the key policy rate unchanged at 6.50 percent. He had cut repo rate by 25 basis points in April.

Also, the central bank kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 percent of net demand and time liabilities (NDTL) and continued to provide liquidity as required but progressively lower the average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality.

Meanwhile, the Sensex fell 0.02 percent or 0.76 points to 27,774 and Nifty-50 futures traded 0.22 percent lower or 17.60 points at 8,577.75 by 07:40 GMT.