MUMBAI: Indian government bond yields moved marginally higher in early trading on Tuesday, as traders cashed in profits from a two-session price rally after weaker-than-expected economic growth data, while a fresh debt supply was in focus.

The benchmark 10-year yield was at 6.7198% as of 9:45 a.m. IST, compared to its previous close of 6.7086%.

The yield declined by 10 basis points since data on Friday showed India’s economic growth slowed much more than expected in the July-September quarter, and briefly hit its lowest level since Feb. 21, 2022.

Bond yields move inversely to prices.

“With the benchmark bond yield at 6.70%, some profit taking is anticipated, especially with the way state-run banks have sold in last two days,” a trader with a state-run bank said.

State-run banks net sold bonds worth 296 billion rupees ($3.49 billion) across Friday and Monday, mostly after the growth data pushed bond yields down.

The decline in yields and swap rates is signalling the central bank may move to loosen monetary policy via a lower cash reserve ratio for banks.

Most economists have tempered their full-year economic growth forecasts and a majority now expect an interest rate cut in February.

India bond yields to trend higher as US peers spike

The Reserve Bank of India’s monetary policy decision is due on Friday, and the central bank is under increasing political pressure to cut interest rates since the growth data, but its firm focus on getting inflation down means it is unlikely to do so.

India’s finance and trade ministers have called for lower interest rates to help industries to ramp up investments and build capacities.

Market participants will also remain focused on debt supply, with Indian states aiming to raise 258.37 billion rupees through bond sales later in the day.