India bonds flat on caution before debt supply

MUMBAI: Indian government bonds were little changed in early deals on Friday as traders stayed cautious ahead of the weekly debt sale. The benchmark 10-year yield was at 6.5150% as of 10:00 a.m. IST, compared with 6.5150% at the previous close.

New Delhi will auction 320 billion rupees ($3.61 billion) of the 6.48% 2035 bond later in the day, the second such sale, taking the total issuance to 640 billion rupees.

“The demand and cut-off level for the new 10-year in the auction will be key to give a direction to the market,” a trader at a private bank said.

“We also have to see whether the RBI will continue its secondary market purchases after the maturities.”

Bond yields eased on Tuesday and Thursday as investors classified as “others” on CCIL bought heavily in the secondary market for a third straight session, traders said. The market was shut on Wednesday for a local holiday.

These investors purchased 142 billion rupees ($1.7 billion) of bonds this week, clearing house data showed.

While some speculate the buying reflects central bank support, others said upcoming maturities of the 5.15% 2025 bond, worth 1 trillion rupees, may be driving demand.

About 25% of that stock is held by the RBI. Rising liquidity levels in the banking system has also helped hold the 10-year yield below 6.52% level, traders said.

Net liquidity surplus widened to 2.32 trillion rupees on November 6, its highest level in nearly 8 weeks.