Bond yields rally in May on rate cut hopes after BJP's resounding victory

The bond market expects at least 25 basis points (bps) cut in the June 6 policy

Since the beginning of May, 10-year bond yields have fallen 28 basis points, as investors factor in sharp rate cuts by the Reserve Bank of India (RBI) after the ruling BJP’s resounding victory at the polls.

Most of the movement in yields have come after the exit poll results, as foreign portfolio investors also increased their investments in Indian bonds. The 10-year bond yields closed at 7.13 per cent, two basis points lower than the previous close, but considering that the yields were at 7.41 per cent at the end of April, the movement is pretty sharp.  

The bond market expects at