MUMBAI: Indian government bond yields are expected to rise in the early session on Friday, ahead of a fresh supply of debt through the weekly auction, while elevated US yields will continue to hurt investor sentiment.
The benchmark 7.26% 2033 bond yield is likely to be in the 7.18%-7.23% range after ending the previous session at 7.1981%, the highest since April 20, a trader with a state-run bank said.
New Delhi aims to raise at least 390 billion Indian rupees ($4.71 billion) through the sale of bonds, which includes liquid seven-year and 14-year bonds.
“We already witnessed the breach of the key 7.20% level yesterday.
We are expecting the benchmark to rise again today as sentiment is not very strong to keep on absorbing continuous supply,“ the trader said.
Traders will also keep an eye on the Indian rupee’s movement as it fell for a third straight session on Thursday, weakening to its lowest level in over two months, tracking broad losses in Asian peers.
Indian bond yields rise as 10-year US yield stays above 4%
It ended at 82.7225 per dollar and is expected to trade with a weakening bias on Friday.
Longer duration US yields hit fresh nine-month highs on Thursday as data showed underlying strength in the economy, which could see rates remaining higher for longer.
The benchmark US 10-year yields hit 4.20% on Thursday, the highest since early November.
The odds of a rate hike in September are just around 18%. Meanwhile, worries that retail inflation will jump again in the near term are keeping investors at bay, as it could force the Reserve Bank of India (RBI) to take a hawkish stance next week.
India’s retail inflation jumped to 4.81% in June, after easing for four months. Many economists are expecting the July reading to rise to around 6.5%, which will break the RBI’s upper tolerance range.
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