Bond yields have started inching up following speculation that the government may shelve its plan to raise funds through an overseas sovereign bond issue.
The yield on 10-year benchmark government bond closed 2 bps higher on Friday to 6.53% after climbing 7 bps on Thursday.
Media reports suggested that the Prime Minister’s office had asked the Finance Ministry for wider consultation before taking such a step.
During her maiden Budget speech, Finance Minister Nirmala Sitharaman said India would look to issue overseas foreign currency sovereign bonds.
Going ahead, the bond yields will take a cue from the Reserve Bank of India’s (RBI) next monetary policy review scheduled for the first week of August.
The market is expecting another 25 bps cut by the RBI in August as inflation continues to be soft and there is a need to boost growth. “We continue to expect the RBI MPC to cut rates by 25bps on August 7, pause with inflation going up temporarily on base effects/drought and cut by 25bps in the March quarter again as inflation abates,” Bank of America Merrill Lynch said in a note to its clients, adding July inflation is expected to be at 3%.