MUMBAI: Indian government bond yields were a tad higher in the second trading session of the New Year as traders awaited the first state debt sale of the quarter that is scheduled with heavy supply.
The 10-year benchmark bond yield was at 7.2054% as of 10:00 a.m. IST on Tuesday after closing at 7.1969% in the previous session.
“We may not see any major action until the state debt auction and till then bond yields should remain in a range, with lower volumes,” a trader with a private bank said.
“Still, the 7.20% level is very critical and is unlikely to be taken out very easily.”
Indian states aim to raise 160 billion rupees ($1.92 billion) through the sale of bonds later in the day as they embark on a heavy supply schedule in the last quarter of the fiscal.
States aim to raise a record 4.13 trillion rupees through the sale of bonds in the January-March quarter, exceeding market estimates.
As the days progress, market participants will likely be keen to react to factors like purchases from foreign investors as well as state-run banks, both of which are expected to be on the buying side this month.
Indian rupee eyes key US data, bond yields seen easing as 2024 kicks off
While state-run lenders made large purchases in the last week of 2023, foreign investment notched a remarkable jump in the last three months of the year, with inflows reaching a six-year high.
Traders also anticipate the bond yield curve to “bull steepen” this year on expected interest rate cuts from the US and Indian central banks.
Bull steepening occurs when the yields on shorter-maturity bonds fall faster than the longer-end.
Meanwhile, the 10-year US yield remained in the critical 3.85%-3.90% range in Asian hours as investors expect the Federal Reserve to cut rates from as early as March.
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