MUMBAI: Indian government bond yields rose on Monday, the beginning of a week laden with supply, including heavy state borrowing that dampened investor sentiment.

The benchmark 10-year yield was at 7.3626% as of 10:05 a.m. IST, highest since Jan. 6, and after closing higher at 7.3478% on Friday. It rose five basis points (bps) last week.

Bond yields had risen on Friday after weaker-than-expected demand at the central government’s debt auction, with caution prevailing ahead of the Union budget announcement on Feb. 1. “As more supply is absorbed by the market, chances of the benchmark bond yield testing the crucial resistance level of 7.38% rises,” a trader with a private bank said.

Debt supply worth 636.50 billion rupees ($7.86 billion) is scheduled to hit the market over the next three trading sessions, barring the shorter maturity Treasury Bills.

Indian bond yields seen lower tracking US peers

Indian states aim to raise 256.50 billion rupees through the sale of bonds on Tuesday, the quantum at its highest in three months, while New Delhi plans to raise 80 billion rupees via green bonds on Thursday and 300 billion rupees via debt sale on Friday.

The Indian market will remain closed on Thursday.

Major focus remains on the federal budget, with the government’s fiscal consolidation path and its borrowing calendar for the fiscal year 2024 set to be the next market-moving trigger.

Most market participants expect gross supply of around 16 trillion rupees, with estimates from Barclays and Goldman Sachs at 16.80 trillion rupees, in a year where redemptions remain elevated.

Traders anticipate a majority of supply to come in longer duration, with the bond yield curve set to steepen in the new financial year.

Meanwhile, oil prices were buoyed by prospects of an improvement in demand from the world’s largest importer China.

The benchmark Brent crude contract gained 2.7% last week, after rising 8.5% in the previous week and was trading at $87.25 per barrel.


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