Indian 10-year bond yields jump 18bps as RBI unexpectedly keeps policy rate steady

The Indian 10-year bond yields jumped 18 basis points on Wednesday after the Reserve Bank of India (RBI) in its last monetary policy meeting of 2016 unexpectedly kept its interest rate unchanged.

The yield on the benchmark 10-year bonds, which moves inversely to its price, bounced 18 basis points to 6.35 percent, post this release.

The Reserve Bank of India (RBI) kept the benchmark repo rate unchanged at the two-day bi-monthly policy decision, concluded Wednesday, based on an overall assessment of the macroeconomic conditions, with an objective of achieving stable consumer price inflation.

The RBI’s Monetary Policy Committee (MPC) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.25 percent. Consequently, the reverse repo rate under the LAF remains unchanged at 5.75 percent, and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.

The decision of the MPC remains consistent with the objective of achieving consumer price index (CPI) inflation at 5 percent by Q4 of 2016-17, while maintaining a medium-term target of 4 percent within a band of +/- 2 percent, while supporting growth.

Meanwhile, the benchmark 30-share Sensex is down 0.63 percent to 26,226, while 50-share Nifty is down 0.47 percent to 8,125 at 9:20 GMT.