India bonds to continue winning run but debt auction cutoffs to act as key driver

MUMBAI: Indian government bonds are set to continue their winning run for a fifth consecutive trading session on Friday as benign oil prices as well as Treasury yields boost investor sentiment, while the move may be capped by fresh supply of debt through a weekly auction.

The benchmark 6.94% 2036 bond yield is likely to hover between 7.12% and 7.18% till the debt auction, a private-bank trader said.

It ended at 7.1710% on Thursday, bringing its four-day drop to almost 25 basis points.

New Delhi plans to raise 360 billion rupees ($3.81 billion) through sale of 15-year and 50-year bonds later in the day.

“There is some more room for rally in the secondary market, but larger moves including a sustained break of 7.15% levels depends on the auction cutoffs,” the trader said.

Oil prices edged higher on Thursday as new attacks on tankers fed worries about supplies while investors reassessed the outlook for the US-Iran war.

Still, the benchmark Brent crude contract stayed below $100 per barrel, after notching a more than 8% fall to its lowest settlement levels since August.

US Treasuries rallied, with the yield on the 10-year note dropping to around 4.85%.

The moves were driven by voter backlash against President Donald Trump’s policies, especially the Iran war’s impact on cost of living, which powered the Democrats to a sweeping midterm victory.

The party vowed to rein in Trump’s agenda, raising expectations of reduced fiscal spending and a quicker resolution to the conflict.

Traders said they will also be focusing on India’s October inflation data, due next week, and its implications for the Reserve Bank of India’s policy path, after the oil-price retreat tempered expectations of aggressive policy tightening.