MUMBAI: Indian government bond yields trended lower as traders bade farewell to 2023 with some buying after a recent rise in yields made for attractive entry points, while valuation-triggered purchases at the end of the quarter also helped sentiment.
The 10-year benchmark bond yield was at 7.1852% as of 10:00 a.m. IST on Friday, after closing at 7.2111% in the previous session.
The benchmark yield rose four basis points in last five sessions and had ended at 7.2162% in September end.
“It is a well-known factor that yields are expected to decline in the next quarter and since the settlement of today’s trade will be on Monday, traders who were on the sidelines since the last few days, have turned active,” trader with a state-run bank said.
On Thursday, Reuters reported citing senior state-run bank treasury officials that they are likely to resume buying bonds from January after two months of sales.
The government bond yield curve is set to bull-steepen in 2024, as expected interest rate cuts by the US Federal Reserve and the Reserve Bank of India play out, multiple analysts told Reuters.
Indian bond yields’ dip capped by expected fresh debt sale
The 10-year US yield stayed below the critical 3.85% level as investors anticipate the Fed to cut rates from as early as March.
Back home, focus remained on the weekly debt auction later in the day, as well as the borrowing calendar from Indian states for last quarter of fiscal year.
New Delhi aims to raise 330 billion rupees ($3.97 billion) through the sale of bonds later in the day.
The auction includes 160 billion rupees of the benchmark paper, which will take outstanding issuance near the upper cap, which could impact demand.
Traders expect state borrowing calendar of around 3.50 trillion rupees, tilting to the heavier side, after states borrowed more than schedule in October-December, which was first such instance in 13 quarters.
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