MUMBAI: Indian government bond yields rose in the early session on Friday, with benchmark bond yield touching 7.10% as traders braced for a fresh debt sale through the weekly auction, while an uptick in US yields hurt sentiment.
The benchmark 7.26% 2033 bond yield was at 7.0910% as of 10:00 a.m. IST, after ending the previous session at 7.0827%.
“Bulls have turned cautious as the week progressed, and with the 10-year US yield rising again, we are seeing some more selling,” a trader with a state-run bank said.
“Debt auction cutoffs would be the crucial trigger for the day, and any weakness in demand could see more selling.”
New Delhi aims to raise 310 billion rupees ($3.78 billion) through the sale of bonds on Friday, which includes 120 billion rupees of a new 14-year bond.
Heavy supply from the central and state governments in the current quarter is expected to put upwards pressure on bond yields, traders have said. Yields rose in the last couple of sessions after trending below the key technical level of 7.08% for the benchmark.
Indian bond yields seen little changed amid lack of fresh cues
US yields rose on Thursday, with the 10-year yield hovering around the 3.85% mark, as initial jobless claims for the week ended July 15 fell to their lowest since mid-May.
The data indicates that the economy was not weakening as feared earlier, and traders now await guidance from the Federal Reserve, with its interest rate decision due on Wednesday.
The odds of a 25-basis point hike stay around 96%, but that of another increase after that have receded.
The Fed has raised rates by 500 basis points since March 2022.
Meanwhile, foreign investors continue to largely remain on the sidelines, as their purchases have slowed down further in July while they await better levels to build fresh positions.
“Levels above 7.20% on 10-year bond yield are good levels to build long positions,” said Nagaraj Kulkarni, co-head of Asia Rates Strategy (ex-China) at Standard Chartered Bank said.
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