Indian bonds give up early gains as profit taking blunts debt switch boost

MUMBAI: Indian government bond yields erased most early declines on Friday as traders booked profits after a four-day rally and awaited fresh supply at the weekly auction.

The 10-year benchmark 6.48% 2035 bond yield stood at 6.6684% at 10:15 a.m. IST, after closing at 6.6833% on Thursday.

The yield fell to 6.6391% in early trade after dropping 8 basis points over the previous three sessions. Bond yields move inversely to prices.

“The initial reaction is over for now, and we should head back in 6.70%-6.75% zone over coming days, if there is no new trigger to push up demand,” trader with a mutual fund said.

New Delhi bought securities maturing in the next financial year, worth 755.04 billion rupees ($8.33 billion) on Thursday, while issuing 694.36 billion rupees of 8.30% 2040 bond as part of a switch operation.

Switch operations are part of the government’s debt management strategy, enabling it to reduce near-term repayment pressure by exchanging shorter-maturity bonds for longer-dated securities.

The move comes ahead of a heavy maturity pipeline of 5.47 trillion rupees in 2026–27, and which had driven gross borrowings to a record 17.20 trillion rupees for the next year.

Meanwhile, India’s retail inflation rate accelerated to 2.75% in January, the maiden print under a revised data series showed on Thursday, returning to the central bank’s target band for the first time since August.

A Reuters poll of economists had predicted the reading at 2.40%.