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After the RBI delivered repo rate cut for the third time in a row and signalled further easing go ahead, 10-year benchmark bond yield was dragged down by 9 basis points to a new 18-month low of 6.933% versus previous close of 7.02%. Bond prices and bond yield share an inverse relationship i.e. when bond prices increase, bond yield decreases.
The six-member Monetary Policy Committee voted for a rate cut and lowered the repurchase or repo rate by 25 bps to 5.75%, its lowest level in 9 years. Also the central bank changed its policy stance from 'neutral' to 'accommodative'. At the same time, it has revised its growth forecast for the FYY 2019-20 lower to 7% from the earlier projected level of 7.2% in April.
Inflation forecast for the first half of FY20 has been revised higher to 3-3.1% from 2.9-3% in April.
As per analysts, lowering of the growth forecast indicates more easing by the RBI.
The rupee also ended the session flat at 69.28 per US dollar in comparison to the previous close of 69.26.
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