MUMBAI: Indian government bond yields were little changed on Thursday, with traders focused on a debt buyback, after they opened higher tracking a rise in US Treasury yields.
India’s benchmark 10-year yield was at 7.0146% as of 10:05 a.m. IST, following its previous close of 7.0129%.
“The focus for the day is on the result of debt buyback, and what quantum the central bank accepts.
The rising US Treasury yields are adding some pressure, but strong local factors are offsetting them for now,“ the trader added.
The central government aims to buyback bonds worth 400 billion rupees ($4.80 billion) maturing within this financial year, in what would be its fourth such attempt in as many weeks.
It has already bought back securities worth around 179 billion rupees so far, and reduced the supply of Treasury bills by 600 billion rupees till the end of June, as it sits on surplus cash.
US yields rose further after commentary from Minneapolis Federal Reserve Bank President Neel Kashkari prompted a further reduction in bets of rate cuts in the world’s largest economy.
India bonds not reacting to strong domestic growth, yields little changed
Kashkari in an interview said that the Fed should wait for significant progress on inflation before cutting interest rates, and he would need “many more months of positive inflation data” for confidence to turn towards easing.
Bets of a rate cut in September has eased to 47%, down from 58% in the previous week, while the futures market is pricing only around 31 basis points (bps) of rate cuts this year, compared with over 50 bps earlier in the month, according to CME FedWatch Tool.
Still, broader sentiment was upbeat on the RBI’s record surplus transfer that bolstered the government’s fiscal position, and on a rating outlook upgrade from S&P Global Ratings.
This adds to the positive view towards government bonds, especially after the record high central bank surplus transfer, DBS said.
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