India 10-year benchmark govt bond yield at 6.32% vs previous close 6.31%

India 10-year benchmark govt bond yield at 6.32% vs previous close 6.31%

Indian government bond yields ended largely unchanged on Thursday, July 2, 2025, as traders awaited further cues on liquidity management from the Reserve Bank of India (RBI). The yield on the benchmark 10-year bond (IN063335G=CC) ended at 6.3156%, after closing at 6.3136% on Wednesday [1].

Market sentiment remains cautious due to tight liquidity signals from the RBI via Variable Rate Reserve Repos (VRRR). Pawan Somani, founder of Infinask Advisors, noted that "market sentiment remains cautious amid tight liquidity signals from the Reserve Bank of India via Variable Rate Reserve Repos (VRRR)" [1].

The 10-year note has hovered between 6.28% and 6.32% since the start of the month, and the trend is likely to continue amid fresh triggers, traders said. New Delhi plans to sell bonds worth 250 billion rupees ($2.92 billion) on Friday, including a new seven-year note [1].

The note traded at around 6.25% in the 'when-issued' segment of the trading platform on Thursday. Market focus is also on liquidity levels in the banking system and on any further measures by the RBI to drain the surplus [1].

The RBI's second liquidity-absorbing operation in four sessions on Wednesday pushed overnight rates above the floor of the policy corridor. The newly launched Secured Overnight Rupee Rate (SORR) has stayed above the floor of monetary policy corridor for the second straight session after slipping below the Standing Deposit Facility rate on Monday and Tuesday [1].

The central bank removed 973 billion rupees via a two-day VRRR on Wednesday. Traders said clarity on a potential U.S.-India trade deal, which U.S. President Donald Trump said was "close", would be a key trigger for the market [1].

India's overnight index swap rates (OIS) were mostly flat as traders awaited more cues, with the trading range shrinking across the curve. The one-year (INR1YMIBROIS=CC) OIS rate was at 5.515%, and the two-year OIS rate (INR2YMIBROIS=CC) was at 5.4875%. The liquid five-year (INR5YMIBROIS=CC) OIS rate was at 5.69% [1].

The RBI is expected to conduct another liquidity withdrawal operation, which could push bond yields higher. Indian government bond yields may move higher in early deals on Tuesday as sentiment weakens after the country's central bank announced yet another liquidity withdrawal operation [2].

The yield on the benchmark 10-year bond (IN063335G=CC) is expected to trade between 6.30% and 6.33%, a trader at a private bank said, after closing at 6.3163% on Monday. The five-year 6.75% 2029 bond (IN067529G=CC) ended at 6.0025% [2].

The Reserve Bank of India will conduct a three-day variable rate reverse repo auction (VRRR) for 1 trillion rupees ($11.63 billion) later in the day. This would be in addition to 1.52 trillion rupees that it sucked out from the banking system on Friday via a seven-day VRRR [2].

India's annual retail inflation slowed to a more than six-year low of 2.10% in June, which was lower than the 2.5% estimated by economists in a Reuters poll and 2.82% in May. Core inflation, which excludes volatile items such as food and energy and is an indicator of domestic demand, however, was at 4.4%-4.5% in June, from 4.17%-4.20% in May, according to economists [2].

References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3T70RY:0-india-bonds-flat-traders-eye-debt-supply-rbi-liquidity-move/
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3TC06P:0-india-bond-yields-may-inch-up-as-rbi-announces-another-cash-withdrawal/