MUMBAI: Indian government bond yields are expected to trend marginally higher in early trade on the last day of the week as traders gear up for a fresh debt supply via the weekly auction, while markets await the minutes of the central bank’s latest policy meeting.
The 10-year benchmark bond yield is expected to move in the 7.17%-7.21% range till the debt sale, after closing at 7.1897% in the previous session, a trader with a private bank said.
“We saw selling pressure towards the end of the session yesterday and as such nothing has changed, so yields should inch higher at least till the debt auction,” the trader said.
“Still, the critical level of 7.20% is a strong resistance, and should not be taken out, unless demand surprises negatively.” New Delhi aims to raise 300 billion rupees ($3.61 billion) through a sale of bonds in the penultimate auction of 2023 later in the day.
The auction includes the liquid 14-year bond. Traders will also eye the minutes of the Reserve Bank of India’s December meeting.
The central bank had maintained interest rates and its stance for the fifth consecutive time and had also adopted a cautious tone on inflation.
India bond yields seen little changed before state debt sale
Traders will look for clues from the central bank members about the rate trajectory in 2024, with broader expectations that there may be no rate action until the middle of next year.
Meanwhile, US yields stayed lower, with the 10-year yield near the 3.90% mark in Asian hours, while the inversion with the two-year yield narrowed ahead of the Personal Consumption Expenditures (PCE) data, which is an inflation gauge.
US yields have plunged in the last few weeks on rising bets that the Federal Reserve will deliver rate cuts from as early as March.
Markets now see a 83% probability of the Fed cutting rates in March.
The central bank has projected three rate cuts in 2024, but the market is pricing-in six cuts of 25 basis points each.
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