MUMBAI: Indian government bond yields are expected to edge higher in early deals on Tuesday, as states are set to raise record funding in the last trading week of the financial year.
However, bond yields may not rise significantly in the first half of the session, as the Reserve Bank of India will also purchase debt.
The benchmark 10-year bond yield is likely to move between 6.62% and 6.65%, a trader with a private bank said, compared with Monday’s close of 6.6291%.
The 10-year yield has stayed close to its lowest level in three years.
“States have updated their borrowing figures at the last minute, and we should see some mild reaction, but the 10-year yield may not break 6.65% on the upside,” the trader said.
Indian states aim to raise 746.55 billion rupees ($8.72 billion) through the sale of bonds on Tuesday, and the quantum is the highest ever raised by states through a single auction, and is also above the 540.65 billion rupees scheduled earlier.
The quantum is also higher than scheduled for the fourth consecutive week.
States have already raised 1.53 trillion rupees through the sale of bonds in March, against a schedule of 1.21 trillion rupees.
India bond yields seen easing after central bank doubles debt buy
Despite elevated supply through the month, bond yields have come down amid improving investor demand as well as another open market bond purchase by the RBI.
The central bank is set to buy bonds worth 500 billion rupees on Tuesday after buying notes worth 1 trillion rupees this month.
The RBI has already injected more than 5.50 trillion rupees into the banking system since mid-January.
Investors are betting on another rate cut at the RBI’s monetary policy decision on April 9.
The central bank had reduced its key policy rate for the first time in nearly five years in February.
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