MUMBAI: Indian government bond yields were marginally lower at the start of the week, which has few fresh triggers for market participants to take cues.
The 10-year benchmark 7.26% 2033 bond yield was at 7.1384% as of 10:00 a.m. IST on Monday, after ending at 7.1556% in the previous session.
Though, sentiment is positive after strong demand at Friday’s auction led to breaking of key levels on the downside, constant offers from state-run banks will limit any further down move, a trader with a primary dealership said.
Bond yields dipped on Friday, after foreign banks likely bought a major share of debt at an auction, leading to a sharp fall in yields in the secondary market.
Traders said, with no major negative cues, there is some fresh interest being generated in Indian bonds, but the level of 7.12% may act as a crucial downside resistance level for the new benchmark 2033 bond.
Since there are no major triggers for bond markets this week, traders will remain focused on debt supply as well the US Federal Reserve’s policy decision on May 3.
The 10-year US yield continued to stay above 3.55%, with the odds of a 25 basis point rate hike by the Fed at above 90%.
India bond yields flattish, focus on debt sale after hawkish central bank minutes
The Reserve Bank of India (RBI) had maintained status quo on its policy rate earlier this month, but more hikes could be needed to align inflation towards its medium-term target of 4%, according to minutes from the Monetary Policy Committee. India’s March retail inflation was at 5.66% and is expected to ease below 5% in April.
Traders will also keep any eye on overnight rates, which stayed above the RBI’s repo rate last week, as banks hastened to borrow funds to meet reserve needs.
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