MUMBAI: Indian government bonds fell for a second consecutive week, after hawkish commentary from the U.S. central bank pushed up Treasury yields, while continued worries over debt supply further dented investor appetite.
The yield on the 10-year benchmark ended at 6.4885%, after closing at 6.5139% on Thursday. The yield rose marginally on the week, after climbing 2 basis points last week.
Yields move inversely to prices.
The Federal Reserve reduced interest rates by 25 bps and indicated 50 bps of more cuts in 2025. However, Chair Jerome Powell said the Fed will be in a “meeting-by-meeting situation” regarding the rate cut outlook, and framed the move as a risk-management cut.
This indicates that the rate cut cycle may not be that deep, said Gaura Sen Gupta, chief economist at IDFC First Bank.
Locally, market remains concerned about constant supply from the centre and states, which has pushed up yields and skewed demand-supply dynamics.
Traders now await the borrowing calendar from the centre for the second half of the fiscal year, which is likely to be published before the end of September.
In a round of consultations with multiple market participants earlier this month, the central bank received suggestions to reduce the share of ultra-long bonds in overall supply and also cut weekly auction sizes.
The state bond issuance calendar for October-December quarter, which would be released around the same time, also gains significance, traders said.
Earlier this week, the RBI asked states to spread their borrowings across tenures rather than focusing on long-term bonds and to communicate fundraising plans more precisely.
Rates
India’s overnight index swaps were mixed, with the shorter end little changed, while the longer end witnessing some uptick.
The one-year OIS rate was at 5.45% and the two-year OIS rate was at 5.42%.
The liquid five-year OIS rate ended at 5.71%.
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