MUMBAI: Indian government bond yields rose in the early session on Tuesday as US Treasury yields scaled fresh highs, damping the appetite for local papers ahead of debt sales in a holiday-truncated week.
The 10-year benchmark 7.18% 2033 bond yield was at 7.1698% as of 10:00 a.m. IST, after ending at 7.1541% in the previous session.
“Though, the Indian yields will not react at par with the spike in US peers, this is a major factor that is supporting the bears currently,” a trader with a private bank said.
Heavy supply at the quarter-end is also weighing on the bonds, the trader added.
Indian states will raise 270 billion rupees ($3.25 billion) through a sale of bonds later in the day, while New Delhi will mop up 390 billion rupees on Friday.
Indian money markets will remain shut on Thursday for holiday.
Ahead of this supply, banks have lined up sales of 120 billion rupees of bonds on Tuesday and Wednesday, after the State Bank of India raised 100 billion rupees last week.
US yields extended their rise into Asian hours on Tuesday with the benchmark 10-year yield logging a fresh 16-year high on bets of higher-for-longer interest rates.
Chicago Fed President Austan Goolsbee said inflation staying entrenched above the central bank’s 2% target remains a bigger risk than a tight Fed policy slowing the economy more than needed.
Meanwhile, elevated US yields and crude oil prices dented investors’ appetite, leading to a sharp reversal in the rally post JPMorgan’s inclusion of India’s sovereign bonds in its emerging market debt index.
The benchmark Brent crude contract continues to hover around $93 per barrel. JPMorgan will begin the inclusion on June 28, 2024, and extend over 10 months with 1% increments on its index weighting.
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