MUMBAI: Indian government bond yields are expected to be little changed in early deals on Friday as market participants await a fresh supply of debt through the weekly auction.
The 10-year bond yield is likely to move between 6.72% and 6.76%, a trader with a private bank said, compared with its previous close of 6.7483%.
“After the strong decline in Indian yields that we have seen this week, we could see some breathing space today and traders will wait for cutoffs at the debt auction before any major move,” the trader said.
New Delhi will aim to sell bonds worth 360 billion rupees ($4.16 billion) later in the day, which includes the liquid five-year and 15-year notes.
India bond yields set to ease, US inflation data reignites Fed rate cut bets
Indian bond yields fell on Thursday, tracking a similar move in US Treasury yields, after data showed that underlying US inflation softened in December, raising bets that the Federal Reserve may cut rates further in 2025.
The data did not change expectations of a pause in easing by the Fed this month, but investors are now anticipating 42 basis points of rate cuts in 2025, up from around 26 bps before the inflation figures.
The 10-year yield, which plunged on Wednesday, declined further in the prior session after the inflation data and was around 4.60% during Asia trade on Friday.
Underlying sentiment in the Indian market is also upbeat as the central bank on Wednesday assured liquidity infusion on a daily basis, allaying rising concerns over a shortfall of funds.
The Reserve Bank of India will conduct variable rate repo auctions on all working days until further notice.
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