MUMBAI: Indian government bond yields were lower on Friday as oil prices and Treasury yields dipped and investors turned their focus on the fresh supply of debt through an upcoming weekly auction.
The 10-year benchmark bond yield was at 7.2255% as of 10:00 a.m. IST, after ending the previous session at 7.2356%.
“Any major action in bonds is likely only after cutoffs, which will give a clear idea about absorption of supply at the current levels,” trader with a primary dealership said.
New Delhi will raise 300 billion rupees ($3.60 billion) through the sale of bonds later in the day, which includes 130 billion rupees of the benchmark paper.
A fall in oil prices, as well as US yields pushed the domestic benchmark yield towards the crucial resistance level of 7.20%.
US yields fell on Thursday after weekly jobless claims rose more than expected, helping cement expectations the Federal Reserve will not feel any pressure to raise interest rates again to slow inflation.
Softer-than-expected inflation in the world’s largest economy has increased bets that rate hikes may be done, with the narrative shifting to rate cuts in the first half of 2024, leading to a sharp fall in Treasury yields.
Meanwhile, oil prices tumbled on Thursday as investors worried about global oil demand following weak data from the US and Asia.
The benchmark Brent crude contract crashed to its lowest level in four months and was trading comfortably below the critical $80 per barrel mark. Easing oil prices is good for countries like India, which are major importers of the commodity.
India’s retail inflation eased in October to a four-month low, with the annual retail inflation at 4.87%, down from 5.02% the previous month and edging closer to the central bank’s target of 4%.