India bonds rise on bargain buying, state debt sale eyed

MUMBAI: Indian government bonds firmed on Tuesday, as traders stepped up bargain buying after the 10-year yield could not breach key level at open, easing fears of a move toward 6.70%, while a lower state debt supply for the week underpinned sentiment.

The benchmark 10-year 6.48% 2035 bond yield was at 6.6657% as of 10:30 a.m. IST.

It ended at 6.6842% on Monday.

Bond yields move inversely to prices.

“Support at the 6.68%-6.69% levels and a lower state debt supply are spurring some value buying,” a trader with a private bank said.

Traders added that the moves on either side will be limited until the federal budget announcement on February 1.

The focus is now on the state debt sale due later in the day, with the states set to raise 130 billion rupees ($1.43 billion).

The quantum is sharply lower than the 386 billion rupees planned in the calendar.

Analysts expect New Delhi’s gross borrowing to rise to a record in the financial year starting April.

Investors have been on a selling spree in the last four sessions, after Bloomberg Index Services deferred the inclusion of Indian bonds in its flagship Global Aggregate Index last week, sending the 10-year yield higher by 8.5 basis points.

Meanwhile, the yield on the benchmark 10-year US Treasury note rose above the 4.25% mark for the first time in almost five months after President Donald Trump’s threats to rekindle a trade war with Europe, keeping traders cautious.