MUMBAI: Indian government bond yields rose on Tuesday as traders booked profits ahead of the central bank’s open market debt purchase later in the day.
The benchmark 10-year yield was at 6.3504% as of 10:30 a.m. IST, up from its previous close of 6.3247%.
The Reserve Bank of India (RBI) will buy bonds worth 500 billion rupees ($5.93 billion) and another 250 billion rupees later this week.
Meanwhile, Indian states are set to raise 230 billion rupees through bond sales on Tuesday. Traders will monitor the debt purchase and state debt auction to gauge demand-supply dynamics in the market.
“There has been some selling as traders are booking profits, especially after the government ordered national security drills, which is affecting market sentiment,” said a trader at a primary dealership.
Any escalations in tensions between India and Pakistan could trigger selling but bonds are likely to recover as the focus shifts to positive indicators including the RBI’s bond buying, the trader said.
Indian bond yields dip ahead of RBI’s mega bond purchase
Public sector lenders sold government bonds to book profits on Tuesday, with the 10-year yield trading in the 6.30-6.32% zone during early market hours, while foreign banks were also seen on selling side.
Traders are also keeping an eye on the outcome of the Federal Reserve’s monetary policy decision on Wednesday.
Analysts expect the Fed to keep rates unchanged and Chair Jerome Powell to be non-committal while reiterating the central bank’s independence.
Another key indicator that traders are watching for is the inclusion of the benchmark 10-year Indian bond in the RBI’s debt purchase scheduled for Friday.
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