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MUMBAI: Indian government bond yields rose on Friday, with the benchmark yield hitting levels seen nearly three months ago, ahead of a fresh supply of debt later in the day and next week’s budget announcement.

The benchmark 10-year yield was at 7.3756% as of 10:00 a.m. IST after closing at 7.3480% on Wednesday. It had touched 7.3845% earlier in the session, its highest since Nov. 9. The Indian market was closed on Thursday.

“There was an attempt to break the crucial technical level of 7.38% in the morning, but now bonds will be steady around the current levels till the bidding for auction is done,” a trader with a primary dealership said.

The government plans to raise 300 billion rupees ($3.68 billion) through the sale of bonds, including the liquid 14-year paper.

The auction, which is the third consecutive session of supply, comes after the government on Wednesday raised 80 billion rupees via the sale of 5-year and 10-year green bonds, the first such sovereign issuance.

The country’s large state-run insurer and government-owned banks snapped up at least half of the bond issue, according to senior treasury officials, adding the insurer took at least one-fourth of the 10-year bond. “There is too much supply in a week where the market is cautious.

Indian bond yields tad down tracking US peers; green bond sale in focus

Hence, we have seen the 7.38% level being tested today,“ another trader said. Friday’s auction would be followed by the Union budget on Feb. 1, with the government’s fiscal consolidation path and borrowing calendar for fiscal 2024 set to be the next triggers.

The government will borrow a record 16 trillion rupees in the fiscal year ending March 2024, according to a Reuters poll of economists.

Meanwhile, oil prices continued to show an uptick, with the benchmark Brent crude contract at $87.66 per barrel, on bets of an improvement in fuel demand from China.

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