MUMBAI: Indian government bond yields are expected to trend down in early deals on Thursday, tracking a decline in US Treasury yields, while upcoming debt supply to cap any large fall.
The benchmark 10-year yield is likely to move between 6.67% and 6.72%, a trader with a private bank said, compared with its previous close of 6.7065%.
“We should see some decline in yields at the start of the session, but the overall appetite for longer duration government securities has taken a hit since the last few days, and hence the downward move should be very limited,” the trader said.
US Treasury yields fell on Wednesday, following news that potential US tariffs on Mexico and Canada would only take effect on April 2, about a month later than an earlier deadline.
New Delhi aims to raise 320 billion rupees ($3.67 billion) through sale of bonds on Friday, in what would be the last scheduled auction for central government bonds for the current financial year.
The supply comes when investors are wary of adding more longer duration debt on their portfolios.
The Reserve Bank of India will conduct a three-year dollar/rupee buy/sell swap on Friday, which will lead to a liquidity infusion of around 870 billion rupees.
India bond traders eye demand for state debt for directional trigger
India’s shorter-duration government bond yields have eased after this announcement as the swap will shore up rupee liquidity for up to three years, but longer-duration bonds were not helped as more debt purchases are unlikely immediately, traders said.
Since mid-January, the RBI has infused more than 3.6 trillion rupees into the banking system, including 1 trillion rupees of open market operations and 388 billion rupees via secondary market bond purchases.
The RBI has also infused around 440 billion rupees through a dollar-rupee buy/sell swap and 1.83 trillion rupees via long-term repos.
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