Sovereign bond yields end higher as sentiment cautious after RBI comments

Indian government bond yields closed the first day of the week higher on cautious sentiment after the local central bank's chief said talking about rate cuts would be premature and risky at the current juncture.

The benchmark 10-year bond yield ended at 6.8293% on Monday, compared with its previous close of 6.8193%.
 

"There was a lack of interest for immediate buying from traders, especially after commentary from the central bank that has reduced the possibility of a rate cut in December," VRC Reddy, treasury head at Karur Vysya Bank, said.
 

Bond yields had jumped in the closing hours of Friday, and turned higher from afternoon trades on Monday, as the Reserve Bank of India Governor Shaktikanta Das said it would be "very premature and risky" to lower interest rates at this stage.
 

While inflation is expected to moderate going forward, the central bank will only think of rate cuts when it has confidence that inflation is durably aligned to its medium-term target.
 

The RBI had changed its monetary policy stance to "neutral" earlier this month. The minutes of its latest meeting will be released after Indian market hours on Wednesday.
 

Bond yields declined earlier in the session on the back of Indian states' decision to raise 81 billion rupees ($963.79 million) through sale of bonds on Tuesday, sharply lower than the 296 billion rupees as per the earlier schedule.
 

The RBI did not sell bonds in two of the three weeks until Oct. 11, and traders are betting that they are unlikely to sell further for now.
 

The 10-year U.S. Treasury yield rose above 4.10% in Asian hours, as investors continued to price in a less dovish Federal Reserve. Interest rate futures indicate a 25-basis-point cut by the Fed in November, with a 94% probability.