MUMBAI: Indian government bond yields trended lower early on Tuesday as a sharp spike in yields drove value purchases even though broader sentiment remained cautious on the central bank’s plans to sell bonds and fears that oil could rise again.
The 10-year benchmark 7.18% 2033 bond yield was at 7.3613% as of 10:05 a.m. IST, after ending at 7.3806% in the previous session.
The yield ended at its highest level in seven months on Monday and has risen 17 basis points in the last two sessions, triggered by the Reserve Bank of India’s plans to sell bonds via auctions.
Indian bond yields marginally higher, traders eye directional cues
“There was heavy selloff based on speculations yesterday, and since that has not turned out to be true, some value buying has emerged, but the benchmark yield may now remain around 7.35%” a trader with a private bank said.
Bond yields jumped towards the end of the session on Monday, amid speculations that the central bank may announce details of an open market sale after market hours.
Market participants expect bond yields to remain high, while traders wait for details on the timing and duration of the papers to be up for sale.
The RBI has sold bonds worth 84.90 billion rupees ($1.02 billion) via screen-based operations in five weeks to Sept. 29, to drain additional liquidity.
Traders also remain focused on any impact on oil prices from potential supply disruptions due to the ongoing conflict between Israel and Hamas. The benchmark Brent crude contract is threatening to rise past the crucial $90 per barrel mark.
Meanwhile, U.S. yields eased, with the 10-year yield dropping to 4.65% in Asian hours, amid demand for safe-haven assets following violence in the Middle East.
Traders also eye supply, as New Delhi will raise 340 billion rupees through sale of bonds on Friday, while states aim to raise 102.50 billion rupees later in the day.
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