MUMBAI: Indian government bond yields were largely steady on Friday, after ending near a one-month low in the previous session, as traders waited for a weekly debt sale for further cues.
The 10-year benchmark bond yield was at 7.1893% as of 10:00 a.m. IST, after ending the previous session at 7.1969%.
“There could be some buying interest in bonds as liquidity tightness will ease after the Reserve Bank of India’s (RBI) repo auction announcement. We will get more clarity after debt auction cut-offs,” a trader with a state-run bank said.
The RBI will conduct a 7-day variable rate repo auction for 1 trillion rupees on Friday to aid banks amid likely outflows from the system on account of advance tax and GST.
New Delhi aims to sell sovereign bonds worth 330 billion rupees ($3.96 billion) later in the day.
India bond yields seen lower after Fed strikes dovish tone
The auction includes 10-year benchmark bond and 50-year notes.
Bond yields fell sharply on Thursday, tracking a plunge in US yields, after the US Federal Reserve signalled that policy tightening is over and projected three rate cuts in 2024.
The 10-year US bond yield extended its fall on Thursday and was down by 10 basis points.
It was last at 3.9506% in Asian hours, while 2-year yield was at 4.4280%.
Markets are now projecting a 77% chance of the Fed cutting rates in March, with over 100 basis points (bps) of cuts priced in for next year.
Last week, the RBI maintained its key repo rate at 6.50%, signalling a sustained tight monetary policy stance as it monitors inflation risks.
Meanwhile, oil prices rose, driven by a weaker dollar and an upward revision in the International Energy Agency’s oil demand forecast.
The benchmark Brent crude contract rose 3.2% on Thursday and was hovering around $76.8 per barrel in Asian hours.
The move in oil prices is crucial for net importers like India.
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