Das Says RBI Does Not Target Specific Yield

Bonds are expected to be supported by a number of factors today including a drop in crude prices as an OPEC+ deal appears to draw nearer, lower US yields after a more dovish than expected testimony from FOMC chair Powell, and signs of waning inflation domestically. Data yesterday showed wholesale inflation rose 12.07%, below estimates of 12.18% and slowing from the 12.94% print in May. Yesterday the curve bull steepened after state run banks were heavy buyers in the short-end after selling illiquid bonds in the most recent GSAP operation.

• Elsewhere, RBI Governor Das gave an interview to Financial Express yesterday, he said that direct financing of the government's fiscal deficit by the central bank or creation of new money has downsides, but the RBI's role as debt manager has helped the transmission of monetary policy. He also said the Bank did not target a specific level of yields, alluding to the assumed 6% target for the 10-year. Das said the inflation spike was expected to be transitory and could come down in Q3.
• Markets look ahead to Indian trade balance data today; the trade surplus is expected to have widened to $9.4bn. Also on the docket today is a speech from RBI Governor Das at the financial inclusion summit, scheduled for 1030BST/1500IST.