India bond yields seen little changed before state debt sale

MUMBAI: Indian government bond yields are expected to be largely unchanged on Tuesday ahead of supply of debt from states, while underlying sentiment remains jittery as US Treasury yields remain elevated before key economic events.

The benchmark 10-year bond yield is likely to move between 6.84% and 6.88%, compared with its previous close of 6.8660%, highest since Sept. 3, a trader with a private bank said.

“We should see sideway moves in bond yields, as the 10-year staying above the key psychological level has dented appetite of bulls for the time being,” a trader with a state-run bank said.

Indian states aim to raise 250.50 billion rupees ($2.98 billion) through sale of bonds maturing in five years to 30 years, and the quantum is lower than scheduled for second consecutive week.

Still, in the absence of a weekly central government debt auction in a holiday-truncated week, demand for state debt is expected to be strong, especially from long-term investors like insurance companies and pension funds.

Meanwhile, US yields continue to remain elevated in Asian hours, with the 10-year yield above 4.25% mark, as weak auctions highlighted soft demand before next week’s US presidential election.

Traders also await personal consumption expenditure data due on Thursday, followed by October non-farm payroll data due on Friday.

These major data points would be the key factors in deciding the direction of the Federal Reserve’s next monetary policy decision due after the US presidential election.

India’s 10-year bond yield hits 31-month low; traders eye debt supply

Interest rate futures continue to indicate 95% probability that the Fed will cut rates by 25 basis points next week, with aggregate rate cuts of 78 bps in four policy meetings up to March 2025.

Oil prices tumbled on Monday after a strike by Israel against Iran’s military bypassed oil and nuclear facilities, not disrupting energy supplies.

Oil prices are important for the monetary policy settings of India, as it is one of the largest importers of crude and the price moves have a direct impact on local retail inflation.