Bond yields edge lower after RBI announces OMO

Bond yields edged lower as investors turned optimistic after the Reserve Bank of India (RBI) announced a surprise open market purchase of notes for this week. In order to infuse liquidity, RBI will buy government bonds worth Rs 15,000 crore through open market operations (OMO). However, concerns of an imminent Federal Reserve rate hike could cap gains.

In the global market, the U.S. Treasury prices fell on Friday with short-dated yields spiking up after Federal Reserve Chair Janet Yellen said that gradual U.S. interest rate increases would be appropriate, if the economy improves further and the labor market tightens. Furthermore, Crude oil prices drifted lower on Monday as investors wait to take cues from the Organization of the Petroleum Exporting Countries meeting Thursday, where the supply issue is expected to take center stage.

Back home, the yields on new 10 year Government Stock were trading 1 basis point lower at 7.46% from its previous close at 7.47% on Friday.

The benchmark five-year interest rates were trading 1 basis point lower at 7.42% from its previous close at 7.43% on Friday.