India's shorter-term government bond yields saw a decline in early trading on Monday following an unexpected announcement from New Delhi about a buyback of securities late on Friday, according to traders.
The yield on the 4-year bond, IN073728G=CC, dropped to as low as 7.0980% and stood at 7.1112% as of 9:20 a.m. IST, down from its previous close of 7.1537%.
Citi mentioned in a note that the buyback would inject 400 billion rupees of liquidity into the banking system immediately, which would help alleviate the liquidity tightness observed in late April.
"Citi noted that the Reserve Bank of India might have anticipated that election-related constraints on government spending would further exacerbate liquidity tightness," Citi said.
The Reserve Bank of India stated that the securities offered for buyback include the 6.18% government security maturing in 2024, the 9.15% 2024 bond, and the 6.89% 2025 bond, with no specific limit set for each security at the 400 billion rupees auction.
India's 10-year benchmark bond yield, IN071833G=CC, also experienced a decrease, mirroring trends in U.S. counterparts after weaker-than-expected jobs data reinforced expectations of the Federal Reserve initiating rate cuts later this year
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