Indian government bonds closed the week with little change as traders await clearer signals on inflation, monetary policy, and supply conditions, despite sustained demand for longer-term debt and a persistent flattening of the yield curve.
Indian government bonds finished the week little changed on Friday, with traders still waiting for a clearer signal from inflation, monetary policy and supply conditions, even as demand for longer-dated debt remained firm. The benchmark 6.94% 2036 bond closed at 6.7578%, almost unchanged from the previous session’s 6.7582%, after briefly failing to break below the psychologically important 6.75% level, according to traders in Mumbai.
Market participants said selling by state-run banks helped cap gains, even as foreign banks continued to buy. Alok Singh, head of treasury at CSB Bank in Mumbai, told ETBFSI that buying has been spread across maturities, but the middle of the curve has remained weaker than the short and long ends.
The pattern fits a broader picture seen in recent weeks, with analysts and traders pointing to a flatter or even inverted yield curve as a sign of lingering inflation worries and tight liquidity. Investing.com reported that the inversion is expected to persist until later this month, while earlier commentary in the Economic Times suggested that a flatter curve can also indicate inflation expectations have been re-anchored and financial conditions are no longer restrictive for borrowers seeking longer-term funding. Other market reports have said demand from long-term investors has helped bonds recover after inflation shocks, even as uncertainty over future rate moves has kept shorter maturities under pressure.
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