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RBI Rate-Cut Bets Drive Indian Bond Yields to Lowest Since 2013

  • Goverment lowers small savings plans rates to aid transmission
  • Central bank `widely expected' to ease at April 5 meeting: DBS
Updated on

Indian bonds rallied, pushing the 10-year yield to the lowest since July 2013, as the government’s decision to cut rates on small savings plans was seen paving the way for the central bank to further ease monetary policy.

The move by Prime Minister Narendra Modi seeks to address concerns that higher rates on government savings plans cannibalize deposits in the banking system and have prevented lenders from passing on last year’s 125-basis point reduction in the Reserve Bank of India’s benchmark repurchase rate. RBI Governor Raghuram Rajan, who next reviews rates on April 5, has been urging banks to accelerate transmission.