MUMBAI: Indian government bond yields were up on Tuesday hours ahead of an auction of bonds by states to raise the highest quantum in at least eight years. Still, the US Federal Reserve’s policy decision due on Wednesday remained a key driver for the markets, with bets rising for a rate hike.
The 10-year benchmark 7.26% 2032 bond yield was at 7.3406% as of 10:00 a.m. IST, after closing at 7.3361% on Monday, its lowest level since Feb. 7.
“The quantum of state debt is very heavy considering that we are at the fag end of the (financial) year,” a trader with a state-run bank said. “The only saving grace is that the bulk of the quantum is for the above 10-year bucket, which could be absorbed by long-term investors.”
Indian states aim to raise 391.21 billion rupees ($4.73 billion) through the sale of bonds later in the day, traders said.
The quantum is more than scheduled for the third consecutive week.
Sentiment also impacted as US yields rose marginally on Monday, with UBS’s takeover of Credit Suisse and global central banks’ steps to shore up liquidity helping allay investor concerns.
The two-year US yield was closer to 4.00%, while the 10-year yield was around 3.50% It also increased the odds of the Fed hiking rates by 25 basis points (bps) to 51%, with bets of a status quo at 49%.
Indian bond yields dip tracking US peers; Fed meet eyed
Expectations of a hike had eased to 41% on Monday, after staying as high as 80% last week. Markets feel a Fed pause could lead to a similar action by the Reserve Bank of India on April 6.
The RBI has raised the repo rate by 250 bps to 6.50% in the current financial year.
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