MUMBAI: Indian government bond yields are likely to ease in early trade on Friday as US yields fell further a day earlier, while the major focus will remain on fresh debt supply through the weekly auction.
The 10-year benchmark bond yield is expected to be in the 7.29%-7.34% range, after ending at 7.3245% in the previous session, a trader with a private bank said.
“The move for 10-year US Treasury yield below 4.70% is crucial, and even the Indian benchmark yield may attempt a sub 7.30% move. However, demand for the debt auction will also be crucial to see whether this move sustains,” the trader said.
US yields fell further on Thursday, with the benchmark 10-year yield dropping to 4.65%, its lowest level in three weeks, as investors appeared more confident stepping into the market on relief that the US Treasury Department announced smaller-than-expected increases in longer-dated Treasury supply.
Yields fell after the Federal Reserve’s monetary policy decision, spurring optimism that the central bank will not hike rates anymore. The Fed kept interest rates unchanged on Wednesday, as expected, which has also led to a lower chance of a rate hike next month.
India bond yields fall, tracking US peers; seen rangebound for the day
New Delhi will sell bonds worth 300 billion rupees ($3.61 billion) later in the day, and the auction includes 130 billion rupees of the benchmark paper as well as 100 billion rupees of a new 50-year bond.
The maiden sale of ultra-long 50-year bonds will lower borrowing costs for the government as large insurance and pension funds are expected to scoop up the issue, fund managers and analysts said.
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