MUMBAI, May 6 (Reuters) - India's shorter-tenor government bond yields declined in early trade on Monday after New Delhi surprised the market with an announcement of buyback of securities late on Friday, traders said.
The 4-year bond yield fell to as low as 7.0980%, and was at 7.1112% as of 9:20 a.m. IST, compared to its previous close of 7.1537%.
The buyback would immediately release 400 billion rupees of liquidity into the banking system, helping ease liquidity tightness seen in late-April, Citi said in a note.
"RBI might have anticipated that election-related constraints on government spending would further increase liquidity tightness," Citi said.
The securities offered for buyback are 6.18% government security maturing in 2024, the 9.15% 2024 bond and 6.89% 2025 bond, the Reserve Bank of India said in a statement, though there is no security-wise limit at the 400 billion rupees auction.
India's 10-year benchmark bond yield was also lower, tracking U.S. peers after softer-than-expected jobs data reinforced expectations that the Federal Reserve will start cutting rates later this year. (Reporting by Bhakti Tambe; Editing by Varun H K)
