The Indian government bonds gained on Monday after Reserve bank of India (RBI) surprised markets by announcing another open market purchase of treasury notes. The yield on the benchmark 10-year bonds dipped more than one basis point to 7.460 percent by 0710 GMT.
According to Reuters, India’s central bank will purchase up to 150 billion rupees worth of government securities under open market operations on May 31, it said in a statement late on Friday. This will be the fifth such auction in the current financial year and so far the RBI has bought 550.14 billion rupees worth of government notes through four Open Market Operations (OMOs), as it gradually moves to neutral banking system liquidity from the current liquidity deficit.
Moreover, the Indian bonds have been closely following developments in oil markets because of their impact on inflation expectations, as India imports 80 pct of its crude oil requirements. Today, crude oil prices fell to below $50 after strong dollar weighed on markets and Canadian oil sands production was expected to increase this week, which could potentially push down domestic inflation and widened space for monetary easing going ahead. In the early Asian session, crude oil prices crossed $50 mark after the U.S. government reported a larger-than-expected drop in crude inventories last week. According to the US DOE, crude inventories decreased 4.2 million barrels, as compared to a build of +1.3 million barrels seen prior for the week ending 20 May. This came alongside an increase seen in gasoline inventories of +2.0 million barrels, from a draw of -2.5 million barrels seen prior and a decrease in distillate inventories of -1.3 million barrels, against a draw of -3.2 million barrels. The International benchmark Brent futures fell 0.50 percent to $49.70 and West Texas Intermediate (WTI) dipped 0.36 percent to $49.15 by 0600 GMT.
In additions, markets will look forward to cues on arrival and distribution of annual monsoon rainfall and Q4 Gross Domestic Product (GDP) due on Tuesday (1200 GMT). Meanwhile, the Sensex rose 0.15 percent or 39 points to 26,692.90 and Nifty-50 futures jumped 0.17 percent or 14 points to 8,182 by 0710 GMT.
The material has been provided by InstaForex Company – www.instaforex.com