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(Z1) Off Lows, But Remains Weak


Still Vulnerable


Bullish Price Sequence


India bonds gained to start the week, recovering from the sharp sell off on Friday. Steps taken the RBI have helped support the market.

  • Earlier in the session it was announced that India plans to buy more than INR 3tn ($41bn) of debt in FY 2022 (starting April 2), up from purchases of around INR 2.5tn in FY 2021 so far. The RBI also announced "twist" purchase operations and said there was room to further ease policy due to a shrinking deficit.
  • The RBI has taken these steps to address the rise in yields and a steeper yield curve. According to Bloomberg sources the RBI wants to shrink the repo rate/10-year bond yield spread to 150bps from the current levels of 200bps.
  • Bloomberg sources added that the RBI will inject cash by buying bonds through OMOs, using space offered by the increase the CCR, though there is no specific calendar as this could hamper the RBI's foreign-exchange strategy.
  • On Friday the RBI kept rates on hold, and did not announce any explicit measures to support the bond market beyond "ample liquidity". This inspired a further sell off in the fixed income space, which was already under pressure after the announcement of a bumper, expansion focused budget earlier in February.
  • As a note, the RBI rejected all bids for its benchmark bond at an auction on Friday after yields jumped.