MUMBAI: Indian government bond yields were largely unchanged in the early session on Tuesday, as traders awaited cues from demand at the state debt auction scheduled for a second consecutive week.
The broader market’s focus, however, remained on the Reserve Bank of India’s (RBI) upcoming monetary policy decision.
The 10-year benchmark 7.26% 2033 bond yield was at 6.9866% as of 9:45 a.m. IST, after closing at 6.9958% in the previous session. “We are not expecting any major directional triggers today,” said a trader with a primary dealership.
“Demand and cutoffs for state debt would provide the final cue on market expectations from the central bank policy decision.”
Indian states aim to raise 173 billion rupees ($2.09 billion) through the sale of bonds later in the day.
The quantum is higher than the 117.50 billion rupees scheduled.
States raised 441 billion rupees in the previous two auctions, against 557 billion rupees raised in the first seven debt sales of this financial year, indicating a trend of rising supply.
This would be followed by another heavy supply, as New Delhi is likely to borrow 390 billion rupees through the sale of bonds on Friday.
The auction includes a new 40-year paper.
Indian bond yields may rise in run up to RBI’s policy meet this week
The RBI’s policy decision is due on Thursday, and according to a Reuters poll of 64 economists, the central bank is set to leave the key interest rate unchanged at 6.50% for June and for the rest of 2023.
The Indian central bank had surprised markets with a status quo on rates in its April policy, after hiking by 250 bps in the previous financial year. Focus would also remain on the RBI’s policy stance as well as guidance on liquidity management.
Meanwhile, US Treasury yields remain largely unchanged, with the 10-year yield trading around 3.70%, with odds of a pause in rates by the Federal Reserve next week further rising to 77%.
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