MUMBAI: Indian government bond yields are expected to be largely unchanged in early deals on Thursday, as market participants assess the local central bank’s liquidity management plan while awaiting fresh debt supply on the last day of the week.
The yield on the benchmark 10-year bond is expected to trade between 6.30% and 6.33%, a trader at a private bank said, after closing at 6.3136% on Wednesday.
The five-year 6.75% 2029 bond ended at 5.9704%.
“Investors are not interested in building up large positions in the bond market as of now, and we could see a slow and steady move in yields upwards,” the trader said.
New Delhi plans to sell bonds worth 250 billion rupees ($2.92 billion) on Friday, which includes a new seven-year paper.
On Wednesday, the Reserve Bank of India pulled out 973.15 billion rupees through a two-day variable rate reverse repo (VRRR).
This was in addition to the 1 trillion rupees that the RBI withdrew from the system via a seven-day liquidity withdrawal operation last week.
Daily average liquidity surplus has stood at around 3.85 trillion rupees so far this month, which is more than 1.5% of total deposits in the banking system.
In April, RBI Governor Sanjay Malhotra had said the central bank is looking at a surplus at around 1% of banks’ deposits.
The weighted average interbank call money rate and the tri-party repo rate moved above the standing deposit facility (SDF)rate of 5.25%, which acts as the floor of the monetary policy corridor.
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