Bond yields hit 4-1/2 month lows on dovish RBI policy

Traders are now expecting a rate cut later in the fiscal year

The benchmark 10-year bond yield was down 3 basis points on day at 8.57%, its lowest level since Jan 21 as the dovish central bank policy tone continues to cheer market sentiment.

The central bank while keeping rates unchanged at its policy review also toned down its rhetoric on inflation and hinted it would not raise interest rates further as long as inflationary pressures continued to ease.

Traders are now betting the rate tightening cycle is done with while some are also expecting a rate-cut sometime later in the fiscal year.

A rise in US yields and some intermittent profit-taking could act as speed breakers in the market rally, however, traders see the 10-year yield hitting 8.50% this week.

US Treasuries yields rose to their highest in three weeks on Tuesday as investors reset bets that yields are likely to climb after they fell to 11-month lows last week.