Indian bonds continue to trade higher on RBI rate cut hopes

The Indian bonds gained Tuesday as investors speculate that the Reserve Bank of India (RBI) will lower its key interest rate in its October 4 monetary policy decision.

The yield on the benchmark 10-year bonds, which moves inversely to its price, fell more than 1-1/2 basis points to 6.918 percent (break 7 percent mark for the first time in nearly 7 years), the super-long 30-year Treasury yield dipped more than 3 basis points to 7.129 percent and the short-term 2-year note yield slid 1 basis point to 6.713 percent by 07:00 GMT.

According to Reuters, India's monetary policy committee will decide the policy interest rate at the scheduled October 4 review, and the newly-appointed external members to the panel would be at an arm’s length from the government. Also, interest rate reduction is around the corner amid expectations that inflation will decelerate further in coming months.

India’s central bank and finance ministry officials are due to meet on September 29 to decide the borrowing calendar for fiscal second half that begins October 1. India may borrow 2.45 trillion rupees on a gross basis and 1.8 trillion on a net basis in the fiscal second half, according to India Ratings & Research. States may propose to sell 2 trillion rupees of debt in the same period, the house said. Twelve states are raising 116.50 billion rupees by selling bonds today, the lowest quantum on offer since Jul. 26. Traders expect a strong demand at this auction, Reuters reported

Meanwhile, the Sensex rose 0.32 percent or 91.41 points to 28,380.18 and Nifty-50 futures traded 0.82 percent higher or 74.15 points at 8,805.75 by 07:00 GMT.