India bonds stuck in range as traders eye fresh triggers

MUMBAI: Indian government bonds treaded water on Wednesday as hopes of Bloomberg index inclusion offset geopolitical risks, while traders looked for fresh triggers.

The benchmark 6.94% 2036 bond yield ended little changed at 6.7563%, against Tuesday’s close of 6.7501%. Bond yields move inversely to prices.

The market started the July-September quarter cautiously, with a falling rupee, uncertainty over U.S.-Iran talks and firmer U.S. yields keeping traders on the sidelines.

The currency slid to a near three-week low of 95.2475 per dollar.

Global investors turned cautious ahead of remarks from U.S. Federal Reserve chair. The U.S. 10-year Treasury yield rose nearly 6 basis points to 4.4791% in Asian trade.

Fed Chair Kevin Warsh is due to take part in a question-and-answer session at 9 a.m. EDT at the European Central Bank’s annual forum in Sintra, Portugal.

Technical talks between the United States and Iran were under way in Doha, Reuters reported on Wednesday. Brent crude futures stabilised near $72 per barrel.

At home, traders are waiting for an update on India’s possible inclusion in Bloomberg’s Global Aggregate Index.

“Improved market access and the removal of taxes for foreign investment into government bonds strengthen the case for India’s inclusion in the Bloomberg Global Aggregate Index,” Goldman Sachs wrote in a note.

A private-bank trader said expectations of inclusion were already largely priced in, and that the market needs stronger triggers to break key yield levels.

Traders are watching whether India’s 10-year bond yield can break below its 200-day moving average. A sustained move lower could open room for a further rally.

Rates

India’s overnight index swaps rose tracking higher U.S. yields.

The one-year rate was 2.75 bps higher at 5.7875%, while the two-year rate rose 3.5 bps to 5.93%. The five-year rate gained 4.75 bps to 6.2150%.