MUMBAI: Indian government bond yields will likely be largely unchanged on Friday, following a volatile previous session, as the market awaits fresh debt supply through the weekly auction.
The benchmark 10-year bond yield will likely sway between 6.30% and 6.35%, a trader at a private bank said.
It closed at 6.3216% on Thursday.
“There was strong recovery in bonds (prices) yesterday, with the benchmark yield coming down by 3-4 basis points on strong short covering. But at the current level, we may not see much move on either side, with auction demand becoming the main trigger.”
The 10-year benchmark bond yield hit 6.3586% in the last session, driven primarily by concerns over escalating tensions between India and Pakistan after suspected militants attacked tourists in Kashmir on Tuesday, killing 26 men.
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However, since there was no major break of the key support level of 6.35%, there was heavy short-covering towards the end of the session.
Bond traders would continue to monitor developments on the geopolitical front as India and Pakistan announced tit-for-tat measures against each other, including suspending a water treaty, in the aftermath of the violence.
Meanwhile, New Delhi aims to sell bonds worth 270 billion rupees ($3.17 billion), including the liquid five-year paper, later in the day.
Underlying sentiment remains buoyant, supported by the continuous open market bond purchases by the Reserve Bank of India, which bought notes worth 1 trillion rupees in April and is scheduled to buy bonds worth 200 billion rupees on Tuesday.
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