MUMBAI: Indian government bond yields fell in early trading on Wednesday as value purchases continued, even as market participants await the first auction from the Reserve Bank of India’s planned debt sale.
The benchmark 10-year bond yield was at 7.3289% as of 10:00 a.m. IST, compared to its previous close of 7.3471%.
“It seems they may wait for sum build up in liquidity surplus, and at least for the week, we will not see any additional supply, which is supporting bonds,” trader with a primary dealership said.
India 10-year bond yield above 7.35% attracts value buying
Bond yields rose sharply and have remained elevated since the RBI said last week it plans to conduct open market sales of bonds through auctions to absorb liquidity from the banking system.
The benchmark bond yield had hit a seven-month high of 7.40% on Monday, amid heightened speculations of an OMO sale starting as early as this week.
The RBI sold bonds worth 84.90 billion rupees via screen-based operations in five weeks to Sept. 29, to drain additional liquidity.
Meanwhile, sentiment was supported as oil prices were not showing any major rise despite conflict between Israel and group Hamas, with the benchmark Brent crude contract trading below $90 per barrel.
Safe haven demand and dovish commentary from Federal Reserve officials have also pushed the 10-year U.S. yield to 4.63%, down nearly 25 basis points, from over 16-year highs.
Traders to also remain focus on inflation prints for India as well as the U.S., both due on Thursday.
Indian retail inflation likely eased to 5.50% last month, within the RBI’s tolerance band, on moderating food price rises and government subsidies that offset a surge in the cost of crude oil, a Reuters poll found.
The RBI kept monetary policy unchanged but signalled interest rates would remain high until inflation was closer to 4% target.
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