Bonds Advance as India's Central Bank Surprises With Rate Cut
- Rupee reverses losses after falling initially on decision
- DBS says rate cut positive but ‘fiscal dynamics’ a concern
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Sovereign bonds in India rallied after the central bank unexpectedly cut its key rate and dropped its hawkish stance citing easing inflation, providing relief to traders concerned about a record government borrowing program.
The yield on the most-traded 2028 sovereign bond fell seven basis points to 7.50 percent, cooling from 7.57 percent just before the Reserve Bank of India reduced the policy rate for the first time since August 2017. The drop marked a shift in sentiment that had pushed up yields by the most since May last week on concerns about widening in the deficit targets.