MUMBAI: Indian government bond yields were largely unchanged in the early session on Friday, as traders awaited debt supply after a hawkish tilt in the minutes of the latest Reserve Bank of India meeting.

The 10-year benchmark 7.26% 2032 bond yield was at 7.2235% as of 10:00 a.m. IST, after closing at 7.2206% in the previous session.

The minutes are a bit surprising especially after unanimous decision to pause on rates, a trader with a primary dealership said.

“But market is largely ignoring it and focusing on auction demand and cutoffs, especially for the 10-year paper.”

New Delhi will sell bonds worth 330 billion rupees ($4.02 billion) later in the day, which includes the 7.26% 2033 paper, which will replace the existing benchmark bond soon.

India’s current rate tightening cycle may not be over as more hikes could be warranted to align inflation towards the central bank’s medium-term target of 4%, according to the minutes.

The Monetary Policy Committee had surprised markets by holding the key lending rate at 6.50% on April 6, going against expectations of a 25 basis point hike.

Even though the minutes have a hawkish tilt, most market participants see the bar for another rate hike to be very high, especially with easing inflation.

India bond yields seen little changed before RBI minutes

India’s March retail inflation was at 5.66%, and is set to ease below 5% in April. Nomura expects inflation to average 4.9% in the current financial year, below the RBI’s projection of 5.2%, while it expects growth at 5.3%.

“We expect a sharper cyclical slowdown due to the impact of the global slowdown, combined with the lagged impact of domestic policy tightening.

Hence, we expect the policy pause will give way to a policy pivot towards rate cuts, starting this October,“ Nomura analysts said in a note.