MUMBAI: Indian government bond yields were trading largely unchanged on Thursday, having recovering from a slight dip at open, as traders await a fresh supply of debt through the central government’s weekly auction.
India’s benchmark 10-year yield was at 7.1844% as of 10:00 a.m. IST, following its previous close at 7.1835%. Indian markets are shut on Friday for a holiday.
“The current 7.18%-7.19% level for the benchmark is very crucial and we may see a lot of resistance around this level, with all eyes set for the cutoffs,” a trader with a private bank said.
New Delhi aims to raise 330 billion rupees ($3.97 billion) through a sale of bonds and the auction includes 160 billion rupees of the benchmark papers and will take the outstanding issuance to 1.85 trillion rupees.
This will be the last weekly debt sale before the Union Budget announcement on Feb. 1.
The government is expected to reduce its fiscal deficit as a percentage of GDP to 5.30% from 5.90% this financial year, and will aim for gross borrowing of 15.60 trillion rupees, up from 15.43 trillion rupees this fiscal, according to a Reuters poll.
The market expects the net borrowing to remain largely unchanged at around 11.80 trillion rupees.
Indian bond yields seen steady as traders eye fresh triggers
Traders will also continue to keep an eye on the evolving banking system liquidity situation after the deficit widened to its highest on record on Wednesday.
Meanwhile, US yields continued to move upwards on Wednesday, with the 10-year yield hovering close to the key level of 4.20% after a strong reading of US business activity and before key data this week and the Federal Reserve meeting next week.
Strong economic data recently has led to the trimming of bets over the timing as well as the pace of Fed rate cuts in 2024.
The odds of a first US rate cut by March have eased to 42% now, from 56% on Jan. 17, according to the CME’s FedWatch Tool.
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