MUMBAI: Indian government bond yields were largely unchanged in the early session on Wednesday as traders awaited the Reserve Bank of India’s (RBI) upcoming monetary policy decision due on Thursday.

The 10-year benchmark 7.26% 2033 bond yield was at 6.9772% as of 10:00 a.m. IST, after closing at 6.9780% in the previous session.

Bond yields eased on Tuesday after lower-than-expected cutoff yields for state debt, highlighting the underlying bullish sentiment persisting in the market for the last few days.

We may not see any major trading activity till the policy outcome, as the market seems well-positioned for the decision, a trader with a private bank said.

Indian bond yields seen tad higher, US Treasury moves in focus

A Reuters poll of 64 economists expects the central bank to not only leave the key interest rate unchanged at 6.50% for June, but also maintain a prolonged pause for the rest of 2023.

The RBI surprised markets with a status quo in its April policy after hiking rates by 250 basis points (bps) in the previous financial year to tame inflation.

Barring the rate action, traders will remain focused on any tweaks in the wording of the policy stance, the inflation trajectory, and the RBI’s liquidity management strategy after the recent spurt in surplus.

Guidance on liquidity will take centre stage as the RBI has conducted reverse repos for the last three days, displaying its intention to remove excessive banking system liquidity.

Separately, the central bank will auction Treasury bills worth 320 billion rupees ($3.88 billion) later in the day, while New Delhi will raise 330 billion rupees through the sale of bonds on Friday.

Meanwhile, US Treasury yields remained largely unchanged, with the 10-year yield below 3.70% and the odds of a pause in rates by the Federal Reserve next week further rising to above 80%.