MUMBAI: Indian federal bond yields were largely steady on Tuesday as trader caution prior to the central banks' unveiling of open market operations (OMO) details negated positive nudge from the sale of floating rate bonds in this week's auction.
By 12:05 p.m. (0635 GMT), the benchmark 10-year bond yield was steady at 8.83 percent from its previous close. So far in the session, the yield has stuck in a narrow 8.81-8.84 percent range.
"Market is watching for the securities the central bank chooses to buy back under OMO, which could determine its success," said Sandeep Bagla, senior vice president with ICICI Securities Primary Dealership.
The Reserve Bank of India had said it would conduct OMO on Nov. 24 for the buyback.
Total volume on the central bank's electronic trading platform was at 48.55 billion rupees ($924.8 billion).
State governments will sell 58.60 billion rupees worth 10-year bonds on Tuesday, while the federal government will auction 80 billion rupees of treasury bills on Wednesday.
"Some selling emerged in bonds on positive equities, while global crude also added to the pressure," a senior trader at a foreign bank said.
Indian shares rose more than 1 percent in early Tuesday trade, after eight straight sessions of decline, as investors began covering short positions two days prior to the monthly derivative contracts expiry.
Brent crude held near $107 a barrel on Tuesday as fresh sanctions, and the prospect of military action, against Iran offset persistent worries about the health of Western economies and fuel demand.
India will sell on Friday 30 billion rupees of a floating rate bonds (FRBs) maturing 2020, 60 billion rupees of 9.15 percent 2024 bond and 40 billion rupees of 8.30 percent 2040 bonds, the central bank said on Monday.
"FRBs are expected to sail through on good demand from investors as they will help investors manage interest rate risks better," said Anoop Verma, an associate vice president with Development Credit Bank.
Traders were also watching the evolving macro-economic situation globally for cues.
Ten-year Treasury notes were unchanged on Tuesday from late US levels, supported by persistent worries about Europe's sovereign debt woes and a flight out of risk assets.
A US bipartisan deficit-reduction committee admitted defeat on Monday as expected, abandoning a three-month effort to find $1.2 trillion in budget cuts, but both Standard & Poor's and Moody's Investors Service said failure to agree on a plan would not by itself trigger a ratings downgrade.
The benchmark five-year swap was up 4 basis points (bps) at 7.31 percent, while the one-year rate was 2 bps higher at 8.11 percent.