India 10-year bond yield hits more than 3-year high, RBI policy eyed

India 10-year bond yield hits more than 3-year high, RBI policy eyed

India's benchmark 10-year bond yield rose to its highest levels since March 2019 on Monday as investors prepared for the central bank to raise interest rates again later this week.

The Reserve Bank of India had raised its main lending rate by 40 basis points, off record lows, in a surprise move on May 4 to contain rising inflation.

India's benchmark 10-year bond yield ended trading at 7.4996%, up 4 basis points from its previous close. The yield rose as high as 7.5143%, its highest since March 20, 2019.

"The weight of RBI's policy considerations has shifted away from economic support and towards taming inflation, suggesting that we should see a relatively fast pace of rate hikes ahead," Eugene Leow and Duncan Tan, strategists at DBS Bank said in a note.

"And with inflation proving to be quite sticky, the risks around RBI's hike path are likely tilted to the upside."

A Reuters poll showed that the central bank will be likely to concentrate interest rate hikes over the coming months in a relatively short tightening cycle, to reach its terminal level early next year.

Retail prices in April were 7.79% higher than a year earlier, exceeding the RBI's tolerance band for inflation of 2% to