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Bonds Erase Gains in India as Central Bank Signals Tightening

  • India’s RBI drains liquidity at sharply higher 3.99% cutoff
  • Bonds gained earlier after second-half borrowing came in line
Updated on

Most Indian bonds gave up gains after the central bank drained cash from the banking system at a sharply higher rate, stoking fears the monetary authority is stepping up its policy normalization.

The central bank withdrew liquidity through its 7-day variable rate reverse repo at 3.99%, it said in a statement on Tuesday. That’s 57 basis points higher than the previous auction and just a shade lower than the benchmark policy rate of 4%. Yields rose across the curve after the results, wiping out earlier gains spurred by authorities sticking to the annual borrowing program.