MUMBAI: India government bond yields rose marginally on Friday, as market participants awaited fresh debt supply through a weekly debt auction. New Delhi plans to raise 300 billion Indian rupees ($3.67 billion) through the sale of bonds later in the day.
The benchmark Indian 10-year government bond yield was at 7.2954% as of 0455 GMT, after closing slightly higher at 7.2808% on Thursday.
The auction cut-off will give direction to bond yields in the absence of any major global and domestic triggers, said a trader with a state-run bank.
“The 14-year paper has mostly seen write-offs in the past few auctions, whereas the 10-year paper has mostly seen tail. So there has been a considerable amount of demand in the former due to better yield levels.”
Bond yields have been easing in the last few sessions as cooling inflation has raised bets that the central bank may go slow for future rate hikes.
Buying was further aided by Indian mutual funds flocking back to government bonds as inflation is expected to have peaked, leaving limited room for further rate hikes that, in turn, is leading to a sharp decline in yields, fund managers said.
Indian bond yields tad lower tracking decline in US yields, oil prices
Meanwhile, crude oil prices inched higher after declining for the last two sessions, and were also headed for weekly losses, as concerns over demand rose amid mounting COVID-19 cases in China.
The benchmark Brent crude contract slipped below $90 per barrel on Thursday for the first time in a month.
The movement in oil prices has a direct impact on local inflation as India is one of the largest importers of the commodity.
India’s retail inflation eased to a three-month low of 6.77% in October, and most market participants now expect the central bank to opt for a lower 35-basis points (bps) hike next month, after three back-to-back 50-bps hikes.
The RBI has raised the repo rate by 190 bps since May, to 5.90%.
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