MUMBAI: Indian government bond yields are likely to show a downward bias in the last session of 2024 as investors may indulge in value purchases, with a downward tick in US yields aiding sentiment.
The 10-year yield is likely to move between 6.75% and 6.79% on Tuesday, a trader with a private bank said, compared with its previous close of 6.7731%.
“There was some short covering towards the end of the session yesterday, and continuing from that momentum, we could see some purchases from banks on the last day of the quarter to enhance portfolio valuation,” the trader said.
Indian states aim to raise 247.29 billion rupees ($2.89 billion) through sale of bonds later in the day, while traders keenly await the borrowing calendar for January-March quarter.
Bond market participants expect states’ borrowings in the final quarter of the financial year to be around 60% higher than October-December, with gross borrowing pegged around 4 trillion rupees.
With borrowings seen accelerating to about 4.3 trillion rupees, the weighted average rate of state debt borrowings in January-March is expected to rise to about 7.20%-7.25% compared to 7.11% in October-December.
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Trading volumes are expected to remain shallow, a trend that has been ongoing since the last few sessions.
Daily average trading volume over the last 10 sessions has nearly halved to 371 billion rupees from around 720 billion rupees in the first 10 trading days of December, according to data from the Clearing Corp of India.
Meanwhile, the 10-year US yield eased from eight-month highs, as investors continued to funnel cash into the bond market following losses in equities.
Still, sentiment remained cautious as the Federal Reserve lowered its rate cut forecast for 2025 to 50 basis points from 100 bps earlier.
The odds of a pause in January are at 88%, according to CME’s FedWatch Tool.
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