Debt supply, seconf-half auction calendar to keep India bond yields in thin band

MUMBAI: Indian government bonds are likely to continue to remain in narrow range in early deals on Thursday, as traders await fresh debt supply a day later and the borrowing calendar for this fiscal’s second half which should be announced in next few days.

The yield on the 10-year benchmark note is expected to move between 6.47% and 6.51%, a trader at a private bank said, after closing at 6.4908% on Wednesday.

“We could see choppy moves through the day, but the benchmark bond yield is unlikely to break past the 6.47%-6.52% range for now,” the trader said.

New Delhi will issue 15-year and 40-year bonds worth 160 billion rupees ($1.80 billion) each on Friday, which would be the last auction for the first half of this financial year that started on April 1.

The government is scheduled to borrow 14.82 trillion rupees through sale of bonds this fiscal year, according to the budget, of which it is scheduled to borrow 6.82 trillion rupees through sale of bonds in October-March.

The borrowing calendar would be released in the next three to four days and will be a key trigger for the market as investors worry the supply of longer-tenor debt may exceed demand.

Traders also await states’ quarterly borrowing calendar, slated for release at the end of the month, and a rise in supply could further hurt demand for central government bonds.

The calendar will be followed by the Reserve Bank of India’s monetary policy decision on October 1. India’s largest lender State Bank of India, Capital Economics and Barclays expect a rate cut at this meeting.