Indian bond yield down 12 bps in one week, hints at rate, CRR cut by RBI today

Nomura said in a report that it expects the RBI to slash the repo rate by 25 basis points (bps) in December, along with a 50 bps cut in the CRR (cash reserve ratio) .

Indian bond yields, especially 10-year benchmark bond eased around 12 basis points (Bps) in last one week on optimism that the Reserve Bank of India (RBI) mau cut interest rates or cut cash reserve ratio (CRR) in the monetary policy today.

According to the Bloomberg data, the 10-year benchmark bond 7.10 percent 2034 were at 6.727 percent on December 5, as compared to 6.849 percent on November 28.

Similarly, 6.79 percent 2034 bond yield was trading at 6.678 percent on December 5, as compared to 6.807 percent on November 28.

Terms such as rate cut and CRR cut has surfaced after the the GDP growth rate slowed down in the September quarter. This shrunk the room for the central bank to keep the policy rate unchanged, while throwing open options like CRR cuts to drive growth without impacting inflation. The economy grew at 6.7 percent in the previous quarter and 8.1 percent a year ago (in the September quarter).

CRR is a percentage of a bank's deposits that must be kept with the central bank as a reserve. The RBI uses this tool to control inflation, money supply, and maintain liquidity in the economy. The CRR for banks now stands at 4.5 percent.

Nomura said in a report that it expects the RBI to slash the repo rate by 25 basis points (bps) in December, along with a 50 bps cut in the CRR (cash reserve ratio) .

However, Moneycontrol's poll of 17 economists, bankers, and fund managers showed that the central bank is expected to keep the policy rate undisturbed for the 11th time due to higher-than-expected inflation numbers.

The central bank may not change its `neutral' stance. One respondent, however, expected the bank to shift gears to `accommodative', poll added.