MUMBAI: Indian government bond yields traded largely unchanged in the early session on Friday as the market focus shifts to fresh debt supply via the weekly bond auction.
The 10-year benchmark bond yield was at 7.1594% as of 10:00 a.m. IST, following its previous close at 7.1619%.
New Delhi aims to raise 330 billion rupees ($3.97 billion) later in the day.
The auction includes 160 billion rupees of the benchmark paper.
This will take the outstanding issuance of the note to 1.69 trillion rupees, comfortably above the ad-hoc limit when the government stops issuing a particular security.
“What would be the absorption by the market at current yield levels would be a major driver for the benchmark yield to break 7.15% on the downside, which has been very tough for quite some time,” a trader with a state-run bank said.
The market is not reacting to a slight uptick in Thursday’s US inflation reading, which has not put a dent in expectations of an early interest rate cut by the Federal Reserve.
US consumer prices rose 0.3% last month after nudging up 0.1% in November.
In the 12-month period, the consumer price index (CPI) rose 3.4% after increasing 3.1% in November, against expectations of gain of 0.2% and 3.2%, respectively.
India bond yields little changed before inflation prints
US yields ended lower on Thursday after a volatile session, with the 10-year yield below the crucial 4% mark, while the shorter-end of the curve declined more.
The odds of a rate cut by the Fed in March rose slightly to 73% from below 70% earlier this week.
All eyes are now on India’s retail inflation print, which is expected to rise to 5.87% in December from 5.55% in November as per a Reuters poll, but staying within the Reserve Bank of India’s target range for a fourth consecutive month.
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