RBI pledge seen only giving short-term relief

With the RBI unable to cut rates due to persistent inflation pressure, tension between traders and the central bank kept building as auctions were scrapped and market participants pushed for a formal bond-purchase plan.

MUMBAI: The Reserve Bank of India’s (RBI) pledge to buy as much as 1 trillion rupees (US$13.4bil or RM55.45bil) of bonds this quarter has sent a wave of relief through the sovereign debt market. However, some say the move may be insufficient in the face of the nation’s near-record borrowing plan.

India’s benchmark 10-year bond yield extended its decline to 6.01% after posting its biggest intraday drop in two months on Wednesday following RBI’s explicit assurance of debt purchases.