MUMBAI: Indian government bond yields are expected to trend higher in the early session on Friday, as traders await fresh supply via weekly debt auction, while the Reserve Bank of India’s (RBI) monetary policy guidance subdued sentiment.
The 10-year benchmark 7.26% 2033 bond yield is expected to be in the 7.00%-7.05% range until the debt auction, after closing at 7.0224% in the previous session, a trader with a private bank said.
The 10-year yield posted its biggest single-session rise in four months on Thursday. New Delhi aims to raise 390 billion Indian rupees ($4.73 billion) through the sale of bonds later in the day.
The auction includes a liquid 14-year and a new 40-year bond.
Sentiment is subdued after the policy’s hawkish tilt.
We will see the benchmark firmly remaining above the 7% mark, with auction cutoffs providing an indication about market appetite, the trader added.
central bank kept its key lending rate and stance unchanged, but Governor Shaktikanta Das said the RBI needed to move towards the primary target of inflation at 4%, and that it will do “whatever is necessary to ensure that long-term inflation expectations remain firmly anchored.”
The RBI expects inflation to average 5.1% in this financial year and despite hitting an 18-month low of 4.70% in April, analysts do not expect it to fall to the RBI’s target sustainably in the near term.
Indian bond yields seen tad higher, US Treasury moves in focus
The RBI’s survey and the development of rate hikes globally have led to the central bank adopting a marginal hawkish stance.
The 10-year benchmark bond yield is expected to move in the 6.95%-7.10% band in the coming months, Murthy Nagarajan, head of fixed income at Tata Mutual Fund said.
Meanwhile, the 10-year US yield eased slightly after data showed the number of Americans filing new claims for unemployment benefits rose, suggesting the labour market is cooling, and raised the odds of a pause in rates by the Federal Reserve next week to 75%.
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