MUMBAI: Indian government bond yields are expected to decline in opening trades this week, tracking a drop in US Treasury yields, while geopolitical developments will remain a major focus.
The benchmark 10-year bond yield will likely sway between 6.33% and 6.37% on Monday, a trader at a private bank said.
It closed at 6.3645% on Friday.
“Since there was no major escalation in border tensions between India and Pakistan over the weekend, we could see some bullish bias in opening trades, tracking Treasury moves,” the trader said.
US bond yields declined on Friday amid hopes of an easing US-China trade war and as investors weighed the possibility that the Federal Reserve could pivot toward lower interest rates as economic activity slows.
India bond yields seen little changed ahead of debt sale
The 10-year yield eased on Friday and was further down in Asian hours on Monday at around 4.23%.
India’s bond yields rose in the second half of last week on fears of an escalation of geopolitical tensions between India and Pakistan after suspected militants attacked tourists in Kashmir on Tuesday, killing 26 men.
Bond traders would continue to monitor developments on this front.
India and Pakistan have announced tit-for-tat measures against each other, including India’s suspension of a water treaty.
Still, underlying market sentiment remains buoyant, supported by the continuous open market bond purchases by the Reserve Bank of India, which bought notes worth 1 trillion rupees ($11.7 billion) in April.
It is scheduled to buy bonds worth 200 billion rupees on Tuesday.
India’s overnight index swap (OIS) rates are expected to ease, as US Treasury yields have moved lower, while bets of a dovish domestic central bank continue to favour receiving.
The one-year, two-year and five-year OIS rates ended marginally higher last week after easing sharply in the first half of April.
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