MUMBAI: Indian government bond yields dipped in the early session on Thursday, tracking the drop in US yields, although the move was capped ahead of the upcoming debt supply at the end of the week.
The 10-year benchmark bond yield was at 7.2016% as of 10:00 a.m. IST, after closing at 7.2074% in the previous session.
“For the benchmark, 7.20% is a strong upside level and there ought to be buying in that zone, while the fall in Treasury yields is an added benefit,” a trader with a state-run bank said.
“Still, we may see flattish moves as the market now braces for fresh supply.”
US yields declined, with the 10-year yield briefly sliding below its over five-month-low of 3.80% as investors anticipate a mild US economic recession heading into 2024, which could push the central bank to cut rates more aggressively than expected.
The odds of a rate cut in March are now around 88%, up from sub-80% earlier in the week, while the probability of a total of 150 basis points (bps) of rate cuts in 2024 has risen to 81%, from 76% last week.
The US central bank, earlier this month, had hinted at 75 bps worth of rate cuts in 2024.
India bond yields flattish; traders see activity picking up next week
Locally, traders expect New Delhi to raise 330 billion rupees (nearly $4 billion) on Friday by selling bonds, including 160 billion rupees worth of the benchmark paper.
Traders also await Indian states’ borrowing calendar for the last quarter of the financial year and anticipate heavy borrowing, worth around 3.5 trillion rupees.
States borrowed 2.47 trillion rupees in October-December, exceeding their planned borrowing schedule for the first time in 13 quarters.
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