MUMBAI: Indian government bond yields will continue to be in a narrow range in early deals on Thursday, as traders await fresh debt supply a day later and watch if bets for a rate cut next month rise further.
The yield on the benchmark 10-year bond is likely to move between 6.30% and 6.32%, a trader at a private bank said, after closing at 6.3117% on Wednesday. The 15-year 6.68% 2040 bond ended at 6.6094% in the previous session.
“Market activity has nearly died down, because many are still not fully convinced that we could have another rate cut in two weeks’ time. However, we could see some action tomorrow based on the demand and cutoff for the benchmark,” the trader said.
New Delhi will sell bonds worth 360 billion rupees ($4.2 billion) on Friday, including 300 billion rupees of the benchmark, taking the outstanding issuance to 1.2 trillion rupees, pushing up its liquidity.
Traders are also gauging how expectations of another interest rate cut by the Reserve Bank of India evolve.
A plunge in India’s retail inflation to a more than six year low and expectation it will slip to a record low have led to increased talks of a rate cut.
The RBI’s next rate decision is on August 6.
The central bank slashed its key interest rate a steeper-than-expected 50 bps last month and changed its stance to “neutral” from “accommodative”, which had fuelled speculation that the rate cut cycle may be over.
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