Indian bond yields extend fall as foreign banks build positions

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MUMBAI, Jan 7 (Reuters) – Indian government bond yields dipped on Tuesday, adding to the previous session’s decline, as foreign banks built fresh positions in the New Year, traders said.

The 10-year bond yield was down 1.5 basis points at 6.7342%, the lowest in three weeks. The yield had declined by 3 basis points on Monday.

It looks like foreign banks are “taking up” fresh position in the New Year, a trader at a state-run bank said. “Positions anyway have been quite light overall.”

Foreign banks bought government securities worth 35.45 billion rupees ($413.70 million) on Monday, per CCIL data.

In addition, foreign banks were on the receiving side in the OIS (overnight indexed swaps) market, traders said. The 5-year OIS is down about 8 basis points over two days.

Still, some market participants are not convinced that the 10-year Indian bond offers value at the current level.

There are “just too many uncertainties” currently to take on new positions, a chief fx and rates dealer at a bank said.

“Trump will be taking office shortly and we all know that means added volatility. Plus, worries on the rupee will linger, at least at the margin,” he said.

U.S. President-elect Donald Trump will take office on Jan. 20. The potential tariffs that he has indicated U.S. will impose on trading partners will affect U.S. yields, which in turn would impact rates in India and other emerging markets.

($1 = 85.6900 Indian rupees) (Reporting by Nimesh Vora; Editing by Janane Venkatraman)



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