MUMBAI: Indian government bond yields held their ground on Monday as investors refrained from buying ahead of the last state debt sale for this financial year.
The benchmark 10-year bond yield was at 6.6259% as of 10:20 a.m. IST, compared with its previous close of 6.6249% - its lowest level in over three years.
The 10-year yield steadied after falling 7 basis points last week, clocking its biggest weekly decline in four months.
“We are unlikely to see any major move today and expect a further decline in yields if the state debt auction sees strong bids like the previous week,” a trader at a primary dealership said.
Indian states are set to borrow 566.21 billion rupees ($6.59 billion) through a sale of bonds on Tuesday. States have ratcheted up their borrowings throughout March, raising 1.53 trillion rupees against a target of 1.21 trillion rupees.
Last week’s state debt auction saw bigger-than-expected investor demand, driven by a large provident fund and state-run banks, which pushed yields 6-8 basis points lower than estimates.
Market focus is also on the Reserve Bank of India’s bond purchase on Tuesday, with the central bank set to buy bonds worth 500 billion rupees.
India bond yields seen easing after central bank doubles debt buy
The RBI has injected 1 trillion rupees in the banking system through bond purchases so far this month, easing the liquidity deficit slightly to 2.06 trillion rupees as on March 21, from 2.43 trillion rupees as on March 17.
Meanwhile, foreign investors accelerated their bond buying last week amid increasing bets of another rate cut by the central bank next month.
Foreign investors bought net bonds worth over 95 billion rupees that are part of global indexes during the week ended March 21, according to clearing house data.
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