Bonds rally after RBI eases trading loss rules

MUMBAI (Reuters) - Indian bonds rallied on Tuesday after the Reserve Bank of India (RBI) allowed banks to spread their trading losses over four quarters.

This came as a major relief, especially to state banks which have been reeling under massive trading losses on their bond holdings after yields in the December quarter spiked the most since the September quarter of 2013.

The benchmark 10-year bond yield initially fell to 7.31 percent from its previous close of 7.40 percent, but trimmed some of its fall to trade at 7.33 percent as sentiment was slightly cautious ahead of the Reserve Bank of India’s monetary policy due on Thursday.

The rupee also rose to 65.08 to the dollar from its previous close of 65.17.