RBI’s bond buyback, economic growth is higher amid hopes of push rates

Friday’s data increased by 6.5% in the economy for FY 25, with a 10 -year benchmark yield at four basis points.

Many traders now believe that the terminal policy rate will be higher – 5.50%-5.75%.

Immediately after the end of the trading, the Reserve Bank of India (RBI) also announced Rs 25,000 crore of bond buybacks – which is to impose a sustainable liquidity in the system.

The terminal policy rate of 5% – 5.25% was factor on the expectation that GDP will increase by 6.3% in a section of money market traders. The repo rate, currently at 6%, is expected to be reduced to 5.75% by the second 25 basis points in the declaration of monetary policy on June 6.

CCIL data shows that the 10 -year bond yield traded 6.24% to 6.29% in the five basis point range, with a sharp rise in the last half of the trade. The yield was closed at 6.25% on Thursday.

“There was a section of the market that expected terminal rates of 5% to 5.25%, but with the latest GDP data, the cut expectations accumulated by the RBI have come down. So some bonds were sold,” a senior bond dealer said.

Traders expect that the RBI’s monetary policy announcement on June 6 will make yield easier next week. The RBI is expected to reduce the rate of 25 basis points for the third time in a row.

In addition, the RBI also announced a buyback of government bonds worth Rs 25,000 crore on June 5, which was intended for liquidity, and reduced the redemption cost for the financial year 27. All bonds that the RBI will buy back will mature in FY 27.