MUMBAI: Indian government bond yields are likely to open steady on Monday, as traders awaited fresh triggers after high volatility in the previous session.
The 10-year benchmark 7.26% 2032 bond yield is expected to trade in 7.37%-7.42% band, a trader with a private bank said, after closing 4 basis points (bps) higher at 7.3889% on Friday. Bond yields rose on Friday after the Reserve Bank of India (RBI) devolved a bulk of the 10-year bond on primary dealers at an auction.
“The devolvement by the RBI at such a level for was very surprising, and will dampen overall sentiment,” said Debendra Kumar Dash, senior vice president, treasury, at AU Small Finance Bank.
“While the sentiment has taken a hit on Friday after the devolvement, it is unlikely to result in any sharp yields movement as we are nearing the end of FY23 auction calendar,” the trader said.
Indian bond yields rise tracking US peers, debt auction cutoffs key
The government raised 280 billion rupees ($3.38 billion)through debt sale on Friday, its penultimate sale for the current financial year.
Market participants will also track the movement in the US Treasury yields and oil prices for cues.
US Treasury yields fell a bit on Friday after the 10-year note hit a three-month high, as the market placed greater odds that the Federal Reserve would keep interest rates higher for longer in its fight against persistent inflation.
Market sentiment had turned cautious after a spike in India and US retail inflation rates, cementing bets of more rate hikes.
The Fed has raised interest rates by 450 bps since 2022 and is widely expected to further raise them by 50 bps over the next three months.
The RBI has raised the repo rate by 250 bps since 2022 to 6.50%.