India bonds to open firm on likely RBI support; oil, debt sale to cap upside

MUMBAI: Indian government bonds are expected to open with a positive bias on Friday, supported by another round of strong buying from a key investor group that includes the central bank, though debt supply and elevated oil prices may limit gains.

The benchmark 6.48% 2035 bond yield will likely hover between 6.61% and 6.67% till the debt auction, a private bank trader said.

The yield had ended the last session at 6.6406%, a six-week low.

Bond yields move inversely to prices.

The investor category that includes as insurance companies, pension funds, corporates, and the Reserve Bank of India was a net buyer of 172.50 billion rupees ($1.88 billion) on Thursday, clearing house data showed.

This group of marquee participants has now net bought almost 560 billion rupees of bonds over the last four sessions, reinforcing bets that the RBI has been actively supporting the market to prevent any sharp spike in yields.

“We expect buying to persist today as well, and the 10-year yield may continue to move towards the 6.60% handle, but the most interesting thing to look out for would be the actual RBI buying figures when they are published,” the trader said.

Fears of an untoward spike in yields have completely receded as the central bank continues to purchase of liquid notes, even as Brent crude prices stay elevated, traders said.

The benchmark Brent Crude contract was hovering around $84 per barrel, on growing disruption to global oil supplies triggered by the Middle East war.

Meanwhile, New Delhi will raise 290 billion rupees through the sale of 15-year and 40-year bonds on Friday, its final scheduled debt auction of the current financial year.