MUMBAI: Indian government bond yields eased in early trading session on Wednesday, tracking global peers following the Bank of Japan’s (BOJ) monetary policy decision.
The benchmark 10-year yield was at 7.3206%, as of 10:00 a.m. IST, after closing higher at 7.3335% on Tuesday, the third consecutive session of rise.
Earlier in the day, BOJ retained its yield curve control targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield.
There was some bidding interest after the BoJ decision as yields across the globe were down, a trader with a state-run bank said.
“But higher borrowing fears will not allow the yield to break the 7.30% handle comfortably,” the trader added.
BOJ also made no change to its guidance that allows the 10-year bond yield to move 50 basis points on either side of its 0% target, even as market participants expected it would phase out its stimulus programme due to rising inflationary pressure.
The 10-year U.S. yield declined below the critical 3.50% handle after the decision and was last trading at 3.4850%.
Indian rupee held in narrow range after Bank of Japan policy surprise
Major focus also remained on the Union budget to be tabled on Feb. 1 with an eye on the Indian government’s fiscal consolidation path and its borrowing calendar for the next fiscal.
While Morgan Stanley pegged the gross borrowing at 16.10 trillion rupees ($196.93 billion), HSBC expected it to be 15.90 trillion rupees.
Besides, traders will keep an eye on the movement in oil prices that went up in the hope that a relaxation of China’s strict COVID-19 curbs will lead to a recovery in fuel demand in the world’s top importer.
The benchmark Brent crude contract has risen in six of the last seven sessions until Tuesday and was at $86.70 per barrel.
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