MUMBAI: Indian government bond yields were little changed on Tuesday, with the benchmark yield consolidating around 7.15% mark, as traders awaited a fresh supply of state debt.
The benchmark 10-year yield was at 7.1445% as of 10:00 a.m. IST, following its previous close at 7.1518%. Indian states plan to raise 192 billion rupees ($2.31 billion) through sale of bonds later in the day.
The quantum is lower than scheduled, for the second straight week.
“Since the quantum has undershot the calendar, we are not seeing any major selling pressure before the auction,” a trader with a private bank said.
“For government securities, market will again look for any fresh trigger which could push the benchmark yield below the key level of 7.12%.”
Underlying sentiment remained upbeat, after bond yields ended lower on Monday as India’s core inflation showed a declining trend and amid expectations that inflationary pressures will ease hereon.
India’s annual retail inflation rose to 5.69% in December from 5.55% in November, but was lower than a Reuters poll of 5.87%.
Core inflation, which excludes volatile food and energy prices, was estimated at a four-year low of 3.76%, according to ICICI Securities Primary Dealership.
Indian bond yields flat with focus on debt supply
A sustained fall in core inflation could prompt the Reserve Bank of India (RBI) to ease its policy stance to ‘neutral’ as early as next month, economists said.
The RBI has held rates steady since April 2023, after raising them by 250 basis points in the previous financial year to battle high inflation. US markets were shut on Monday, but futures showed the 10-year US bond yield was hovering around 4%.
Traders await comments from Federal Reserve Board Governor Christopher Waller, due later on Tuesday. Waller’s comments late November had led to rising bets the Fed will pivot towards rate cuts.
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