MUMBAI: Indian government bond yields are expected to be largely unchanged in the early session on Wednesday, as traders await fresh triggers, which include the sale of debt from the central government this week.
India’s benchmark 10-year yield is expected to move in the 7.15%-7.19% range, following its previous close at 7.1751%, a trader with a primary dealership said.
“There is no change fundamentally in any of the factors and hence we may be in for yet another rangebound trading session today.
The next cue could be demand at Thursday’s debt auction,“ the trader said.
New Delhi aims to raise 330 billion rupees ($3.97 billion) through the sale of bonds on Thursday, as Indian markets will remain shut on Friday for a public holiday.
The auction includes 160 billion rupees of the benchmark papers and will take the outstanding issuance to 1.85 trillion rupees US yields continue to remain elevated, as investors await economic growth and inflation data, due later in the week, that could influence the timing of the Federal Reserve’s interest rate cuts.
A string of strong economic data in recent days has pushed the 10-year US yield above the 4.10% mark and has led to the trimming of bets about the timing and pace of rate cuts by the Fed in 2024.
Indian bond yields seen steady before state debt sale
Traders have now trimmed the odds of the first Fed rate cut by March to 49% from 65% on Jan. 16, while the probability of a 150 bps cut in 2024 has dropped to 53% from 82%, according to the CME’s FedWatch Tool.
Market participants are also awaiting the Union Budget for the next financial year due on Feb. 1.
The government is expected to reduce fiscal deficit as a percentage of GDP to 5.30%, from 5.90% in the current year, and gross borrowing of 15.60 trillion rupees, up from 15.43 trillion rupees in this fiscal, according to a Reuters poll.
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