Indian government bonds fall 9th week as RBI defends rupee
Indian government bonds just clocked their ninth week in the red, mainly because the Reserve Bank of India (RBI) is taking strong steps to support the rupee and manage liquidity in the economy.
Yields on key bonds, like the 6.94% 2036 issue, have climbed sharply, up more than 62 basis points lately, making investors uneasy about what's next for returns.
RBI actions and inflation worry investors
The RBI's recent actions, including selling bonds and doubling down on rupee protection, have made markets jittery, especially with inflation rising and talk of a big rate hike coming in December.
Investors also worry that Indian yields might stay high to preserve the spread over US rates, while a further drag from duration-heavy central and state borrowing calendars and easing US Treasury yields offer some relief.
All eyes are now on what the RBI does next, since its decisions could keep bond yields bouncing around for a while.