Macro and Government Bond Commentary: Yields close higher after RBI MPC surprisingly shifts to neutral stance • The 10Y benchmark (6.79 GS 2034) opened little changed at 6.25% ahead of the MPC meeting outcome. Yields fell quickly after the RBI announced a repo rate cut by 50 bps (as against market expectations of a 25-bps easing). However, moves lower in yields did not sustain, and started to reverse after the MPC changed the policy stance from accommodative to neutral, indicating very limited room for further easing ahead. In addition, governor announced to cut CRR by 100 bps in four equal tranches starting Sep fortnight – this allowed the near end of the curve to fall faster. In the post policy conference, governor stressed upon better and faster transmission, while also hinting at an extended pause. The 10Y point closed trade at 6.29%.
