Indian bond yields seen little changed before auction, new 10 year note sale key

MUMBAI: Indian government bond yields are expected to be little changed in the early session on Friday, as traders await fresh supply via weekly auction, which includes a new 10-year bond.

The benchmark 10-year yield could move in the 7.20%-7.32% range till the auction, a trader with a private bank said.

The yield closed up at 7.2959% on Thursday.

A major point of focus would be the cutoff for the new 10-year paper today, especially after a correction was seen in a later trading session yesterday, the trader added.

New Delhi aims to raise 280 billion rupees ($3.41 billion) through the sale of bonds later in the day, and the auction includes 120 billion rupees of a new 10-year paper, which will replace the existing benchmark bond soon.

The new 10-year bond is likely to witness strong demand.

The entire yield curve typically aligns with the cutoff of the new 10-year paper. Bond yields ended higher on Thursday, as investors booked profits after declines in the previous two sessions.

However, underlying sentiment remained positive after the government said it aimed for gross borrowing of 15.43 trillion rupees through the sale of bonds in 2023-24, while keeping net borrowing at 11.81 trillion rupees.

Traders also awaited the Reserve Bank of India’s monetary policy decision due on Wednesday, where the central bank is widely expected to hike the repo rate by 25 basis points followed by a prolonged pause.

Indian bond yields seen lower tracking US peers; budget aids sentiment

The benchmark bond yield could break the key 7.25% handle due to the high likelihood of the central bank changing its policy stance to neutral, after hiking interest rates once for the last time next week, said Vikas Goel, chief executive officer of PNB Gilts.