India's five-year government bond yield returns to 6.50%, narrowing the spread with the ten-year yield to a two-week low
- India's 5-year 6.36% 2031 government bond yield rebounded to 6.50% on Monday, as traders opted to take profits after previous gains. This maturity’s yield showed strong bottom support around the 6.45% level.
- Meanwhile, the 10-year benchmark 6.94% 2036 government bond yield remained steady at 6.85%. Market participants are awaiting new drivers; divergent performance at both ends narrowed the spread between the two securities to 35 basis points, the tightest level in two weeks.
- According to a trader at a foreign bank, foreign investment in the 2031 bond has slowed over the past few sessions, with profit-taking pressure being released. Previously, this spread had widened to over 40 basis points after foreign investors focused on the 5-year bond following the Reserve Bank of India's recent announcement to attract US dollar inflows earlier this month.
- Going forward, attention should be paid to changes in the pace of foreign capital inflows and the Reserve Bank of India's monetary policy stance, as they affect the transmission of rates at the short end. Whether the spread narrows further will depend on whether the 10-year yield finds a new trading direction.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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