MUMBAI: Indian government bond yields are expected to be largely unchanged in early deals on Friday, as traders brace for fresh supply of debt through the weekly auction.
The benchmark 10-year yield is likely to move between 6.68% and 6.72% till the auction, a trader with a private bank said, compared with its previous close of 6.7043%.
New Delhi aims to raise 340 billion rupees ($3.93 billion) in what would be its penultimate debt auction for the current financial year.
This includes the liquid five-year bond.
“After yesterday’s slip up in open market purchase of bonds, traders are looking forward to the demand at the auction to gauge overall investor appetite,” the trader said.
The Reserve Bank of India bought bonds worth 400 billion rupees on Thursday, which included only about 41 billion rupees of the benchmark security, compared with expectations of 50-70 billion rupees.
The drop to this bond accounting for 10% of the total purchases from 25% in a similar auction in January led to selling pressure near the end of the session.
Market participants will also await the RBI’s next steps for infusion of durable liquidity into the banking system in the run up to the end of the financial year, as Thursday’s debt purchase also marks the end of its mega liquidity infusion package.
Over the last five weeks, the central bank has bought bonds worth 1 trillion rupees via auctions, and another 388.15 billion rupees through secondary market screen-based purchases.
India bond yields seen easing after central bank doubles debt buy
It has also conducted dollar/rupee buy/sell swaps worth 440 billion rupees and injected 1.25 trillion rupees via long-term repos, as well as provided funds through daily overnight repos.
Traders are also awaiting the minutes of RBI’s February meeting, due after market hours, where it had reduced repo rate for the first time in nearly five years.
Commentary from the Governor Sanjay Malhotra who had presided over his first meeting would also be crucial, traders added.
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