India bonds seen steady before debt sale; focus remains on Middle East

MUMBAI: Indian government bonds are likely to be steady at the open on Friday, with New Delhi scheduled to raise fresh debt later in the day and investors continuing to monitor the Middle East.

The yield on the benchmark 6.94% 2036 note is likely to move between 6.81% and 6.86%, according to a trader with a private bank.

It closed at 6.8387% on Thursday. Yields move inversely to bond prices.

New Delhi is looking to raise 320 billion rupees ($3.39 billion) through the sale of three-year and seven-year papers.

US Treasury yields were lower on Thursday, a day after investors adopted a hawkish view of Federal Reserve Chair Kevin Warsh’s first meeting and sent short-term yields to their highest level in 16 months.

“Though nothing on rates was expected, the tone of the new governor was particularly very hawkish, which was not anticipated, and which led to a strong reaction in the shorter end of the Treasury yield curve,” the private-bank trader said.

As a comfort to the Indian economy, the benchmark Brent crude stayed below $80 a barrel on the prospect of more supply returning to the market after oil tankers began moving through the Strait of Hormuz.

India imports nearly 90% of its crude oil requirement, and a sustained fall could ease inflationary pressure and support the rupee, helping the central bank’s efforts to attract dollar inflows.

Foreign investors have injected more than $2.2 billion into domestic bonds over the last 10 sessions since the RBI announced measures to attract dollar inflows on June 5.