MUMBAI: Indian government bonds lumbered sideways for most of the session on Monday, ending marginally lower, with traders awaiting more robust signals, starting withTuesday’s state-debt auction.
The yield on the benchmark 10-year note settled at 6.5464%, after closing at 6.5345% on Friday.
Bond yields rise when prices fall.
Indian states are set to raise 178 billion rupees ($2.03 billion) through the sale of bonds on Tuesday, sharply lower than the previously planned 309 billion rupees.
While Monday’s yield moves showed indifference to the lower supply, the cut-off yields in the auction on Tuesday will be key to gauge investor appetite, traders said.
“Market should be rangebound this week…we have to wait to see how the (auction) goes tomorrow,” said Umesh Tulsyan, managing director at Sovereign Global Markets.
The hope for central bank rate cuts is diminishing as a potential US-India trade deal that rolls back tariffs could make them redundant, Tulsyan added.
Market participants are also closely watching U.S.-China trade talks, with the Federal Reserve’s policy decision due on Wednesday.
U.S. officials on Sunday hashed out the framework of a trade deal for President Donald Trump and Chinese President Xi Jinping to pause steeper American tariffs and China’s curbs on rare earths exports.
Separately, the Reserve Bank of India conducted two overnight variable rate repo auctions during the day, worth aggregate of 1.5 trillion rupees, to shore up liquidity.
India’s banking system liquidity surplus stood at 275 billion rupees as of October 26 after remaining in a deficit for most of the last week.
RATES
India’s overnight index swap rates closed slightly higher, tracking U.S. Treasury yields and as sentiment remained cautious.
The one-year OIS rate inched up to 5.47%, while the two-year OIS rate settled higher at 5.4150%.
The five-year swap rate closed slightly up at 5.66%.
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