The yield on India’s 10-year government security hovered around 6.8%, easing from recent highs as investors turned cautious ahead of the Reserve Bank of India’s policy decision. Markets broadly expect the central bank to leave its key interest rate unchanged. Sentiment was further supported by lower oil prices in the previous session, which underpinned demand for government bonds, even as Brent crude rebounded to about $84.8 per barrel on Tuesday.
Trading activity remained subdued as market participants awaited the policy outcome and the RBI’s guidance on growth and inflation, as well as the auction of INR 268.5 billion in state development loans. Overall sentiment was still dampened by Bloomberg Index Services’ decision to delay India’s inclusion in its flagship Global Aggregate Index. However, this disappointment was partially offset by expectations of steady monetary policy and sustained foreign portfolio inflows. Since the beginning of June, overseas investors have purchased INR 367 billion of bonds under the Fully Accessible Route.