Sovereign bonds in India signal growing doubts on RBI's easy policy stance

The inflation shock is adding to uncertainty on whether the central bank would stick to its pledge of keeping policy accommodative to support growth after economy was battered by a deadly Covid wave

A spike in inflation reading this week has revived debate among sovereign bond traders in India over how long the central bank could retain its dovish policy stance.
 

The yield on India’s benchmark 10-year bonds surged to its highest since April, while the borrowing cost on Treasury bills rose to the highest in more than a year this week. That’s a sign that some investors are bringing forward bets for policy normalization by the Reserve Bank of India after retail inflation recently crossed the central bank’s comfort zone of 2%-6%.

The inflation shock is adding to uncertainty on whether the