(Bloomberg) -- The drop in India’s 10-year bond yield is stalling after hitting its lowest level since 2022.
The country’s benchmark yield may struggle to breach a closely watched threshold of 6.85% after sliding for seven straight weeks, according to traders at both Industrial and Commercial Bank of China Ltd. and Jana Small Finance Bank Ltd.
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The narrow spread between the 10-year yield and the Reserve Bank of India’s policy rate, the risk of a spike in oil prices due to strife in the Middle East, and a technical support line that’s held since the pandemic are among reasons cited by traders.
India’s bond market is one of the best performing in Asia this year, thanks to slowing inflation that’s raising the prospect of a central bank pivot and steady inflows linked to its joining JPMorgan Chase & Co.’s flagship emerging market bond index.
A rate cut by the RBI would offer traders a fresh catalyst, analysts say. While calls for policy easing have mounted, officials in Mumbai are expected to hold fire until the US Federal Reserve finally acts. Many economists don’t expect the Indian central bank to ease policy rates until the final quarter of this year.
“A close below 6.85% will probably need actual rate cuts,” said Alok Sharma, head of treasury at ICBC.
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