Indian bond yields seen lower as exit polls predict government continuity
Indian government bond yields are expected to open with a gap down on Monday, with investor sentiment likely boosted after exit polls over the weekend signaled that Prime Minister Narendra Modi's government will secure a third term.
India's benchmark 10-year yield is likely to move in a 6.94%-7.00% range, following its previous close of 6.9809%, a trader with a state-run bank said.
«The exit polls have calmed the nerves, and we are expecting a strong rally in bond prices at the opening itself, and through the day, we could see some consolidation with benchmark bond yield around 6.94%-6.95% levels,» the trader said.
Most exit polls projected the ruling National Democratic Alliance (NDA) could win a two-thirds majority in the 543-member lower house of parliament, where 272 is needed for a simple majority.
Madhavi Arora, an economist at Emkay, said policy continuity will be good for risk assets in the immediate run and macro stability in the medium term and expects bull steepening in government bond yield curve in coming months.
The results of the general election will be announced on Tuesday. India's exit polls have a patchy record, which could curb investors undertaking more aggressive calls on decline in yields.
Fiscal consolidation will also aid sentiment, after India's fiscal deficit for fiscal year 2024 was 5.63% of gross domestic product, lower than its full-year target of 5.8%.
July budget will indicate whether there is any material shift in economic policy stance, while exit polls support lower bond
