MUMBAI: Indian government bond yields were steady in early trade on Tuesday as market participants turned their focus to demand at a states’ debt auction later in the day for further cues.
The benchmark 10-year bond yield was at 7.3075% as of 10:05 a.m. IST, after ending the previous session at 7.3074%.
“States are borrowing more than their scheduled quantum at auction today and overall trading volume is also low, so yields movement will largely remain rangebound,” said a trader with a state-run bank.
Later in the day, 13 states will raise 257.50 billion rupees ($3.09 billion) through sale of bonds, and the quantum is higher than the scheduled 216 billion rupees.
Local bond yields opened marginally higher tracking US yields, which rose on Monday as investors grew cautious about large auctions that could determine whether there is enough demand for US government debt to push rates lower again.
The 10-year US Treasury yield rose above 4.65% on Monday, after briefly falling to below 4.50% on Friday on softer October job growth data.
“While comments from officials of the FOMC (Federal Open Market Committee) have been diverse, other factors like lower Treasury borrowing calendar for Q4 and softening labour market indicators contributed to the subsequent decline in yields,” SBI Capital Markets said in a note.
Consequently, the likelihood of further interest rate hikes has diminished, with any prospective rate cuts not expected until well into the June 2024, it added. Market participants also continue to await the sale of bonds from the Reserve Bank of India.
A continuous sale of bonds from the central bank in the secondary market has further led to uncertainty over the timing of the first auction via open market operation.