MUMBAI: Indian government bond yields are expected to be largely unchanged in the early session on Tuesday, as traders await fresh triggers after a mild selloff in the late session on Monday.
The benchmark 7.26% 2033 bond yield is expected to be in the 7.02%-7.08% range after closing at 7.0605% in the previous session, a trader with a primary dealership said.
There was not much trading volume yesterday, and hence as the offers increased, yield inched above 7.05% handle, the trader said.
Market now awaits the minutes of the latest Reserve Bank of India meeting, which will be released on Thursday.
The central bank had kept interest rates unchanged for the second consecutive time at this meet, but said inflation needed to move towards its 4% target and it would do “whatever is necessary to ensure that long-term inflation expectations remain firmly anchored.”
“Most positives are factored in, and if there is any bearish commentary in the minutes, the range for the benchmark yield may shift to 7.05%-7.10% band,” said Debendra Kumar Dash, senior vice-president, treasury, at AU Small Finance Bank.
Meanwhile, Indian states aim to raise 56 billion rupees ($683.1 million) through the sale of bonds later in the day, with the quantum being sharply lower than the scheduled 180 billion rupees.
Indian bond yields track US peers lower, debt sale to provide cues
States had raised more funds than expected in the last three auctions, with borrowing rising sharply to 654 billion rupees during the period, after remaining low in the first month of fiscal year 2024.
Traders will also remain glued to commentary from US Federal Reserve speakers this week, including Chair Jerome Powell’s congressional testimonies on Wednesday and Thursday.
Last week, the Fed kept interest rates unchanged but warned of a half percentage point hike in 2023. Still, many market participants expect the Fed to raise rates only once and stop the hiking cycle.
The odds of a rate hike in July stand at around 72%.
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