Indian bonds continue to gain post RBI monetary policy decision

The Indian government bonds continued to rally Wednesday after the Reserve Bank of India outgoing Governor Raghuram Rajan announced another open market operation (OMO) of treasuries.

The yield on the benchmark 10-year bonds, which moves inversely to its price, fell 4 basis point to 7.082 percent, the yield on super-long 30-year bond also dipped 6 basis points to 7.248 percent and the short-term 3-year note yield slid 1 basis point to 6.893 percent by 07:10 GMT.

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.

According to Reuters, the RBI will buy up to 100 billion rupees of five bonds tomorrow through the so-called open market operation. The monetary authority has bought bonds worth 805 billion rupees since April 1.

Meanwhile, the Sensex fell 1 percent or 280.57 points to 27,804 and Nifty-50 futures traded 0.89 percent lower or 77.45 points at 8,621 by 07:40 GMT.