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The government bond market extended gains on Wednesday with the yield on the 10-year bond falling for the third straight day to a four-and-a-half month low. The yield on the 10-year bond ended at 8.53% compared with previous close of 8.59%. The yield was last seen at this level on January 20.
According to data published by National Securities Depository Limited (NSDL) foreign investors have exhausted 82.47% of the available limit of $ 20 billion in government bonds. The surge in utilisation has triggered expectations of a further increase in the cap on foreign investment in government bonds.
"RBI's monetary policy helped in positive sentiments for the market and now traders are expecting the budget to be positive too. The market has discounted additional government borrowing of Rs 10,000-20,000 crore. From now till the budget the yield on the 10-year should trade in the range of 8.45 to 8.65%," said Siddharth Shah, vice president, STCI Primary Dealer.
On Tuesday RBI left the repo rate unchanged at 8% and said that should disinflation be faster than expected, "it will provide headroom for an easing of the policy stance.
"RBI seems to be turning more accommodative from its hitherto hawkish stance," Barclays Plc analysts, including Singapore-based Rohit Arora, wrote in a note today. There's "still room to rally" for Indian fixed-income markets, they wrote.
