Bonds in India Retrace Most Gains as RBI Measures Fail to Cheer
An Indian 2,000 rupee, bottom, and 500 rupee banknotes are arranged for a photograph. (Photographer: Brent Lewin/Bloomberg)

Bonds in India Retrace Most Gains as RBI Measures Fail to Cheer

(Bloomberg) -- Sovereign bonds in India gave up some gains after the central bank failed to announce measures to clear some of the supply overhang stemming from record borrowings. The rupee held gains.

The Reserve Bank of India cut its reverse repurchase repo rate by 25 basis points to 3.75% while maintaining the policy rate to discourage lenders from parking money with the central bank, Governor Shaktikanta Das said in an unscheduled briefing. The central bank will also inject 500 billion rupees ($6.5 billion) in a new round of Targeted Long-Term Repo Operations, as it ramps up liquidity to offset the impact of the nationwide lockdown.

The yield on the 10-year bond was down 3 basis points to 6.41% after dropping to 6.29% earlier. The rupee was up 0.4% to 76.4925 to a dollar.

Friday’s measures likely disappointed traders who were expecting the RBI to announce a calendar to buy bonds via open market operations. Indian benchmark yields have risen 30 basis points this month through Thursday even after the central bank cut the benchmark rate by 75 basis points in an unscheduled move late March and injected $50 billion of liquidity.

“Market is unduly disappointed as many were expecting a bond purchase calendar or direct monetization of deficit and the RBI didn’t announce any measures to address the supply concerns,” said Naveen Singh, head of fixed-income trading at ICICI Securities Primary Dealership. “The RBI is going slow, taking one step at a time.”

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