Indian sovereign bonds slide ahead of RBI’s monetary policy decision

The Indian sovereign bonds slid Monday as investors remain cautious ahead of the Reserve Bank of India’s (RBI) monetary policy decision, scheduled to be unveiled on June 7.

The yield on the benchmark 10-year bonds, which moves inversely to its price, jumped nearly 1-1/2 basis points to 7.15 percent, the yield on long-term 24-year note rose 1 basis point to 7.45 percent and the yield on short-term 2-year note traded 1-1/2 basis points higher at 6.49 percent by 07:40 GMT.

The Reserve Bank of India (RBI) is expected to leave its policy rate unchanged at 6.25 percent and to soften the stance of the monetary policy on Wednesday afternoon, aimed at striking a balance between bolstering the nation’s economic growth and securing the retail inflation target of 4 percent±2 percent on a durable basis, Scotiabank reported.

In addition, the central bank may need to revive India’s credit supply growth that has decelerated markedly. The nation’s CPI inflation dropped to 2.99 percent y/y in April from 3.89 percent a month ago, compared to market forecasts of 3.30 percent. The base effect suggests an even softer retail inflation going forward. In addition, normal monsoon rainfall forecasted by the Indian Meteorological Department (IMD) would keep the nation’s retail inflation benign.

Meanwhile, the 30-share benchmark Sensex traded 0.07 percent higher at 31,294.32, while the 50-share benchmark Nifty futures traded 0.24 percent or 22.70 points up at 9,676.55 by 08:00 GMT.