India bonds may drift amid overseas buying, profit-taking

MUMBAI: Indian government bonds are set to trade in a narrow range on Thursday as continued foreign buying is likely to offset profit taking, keeping the benchmark yield hovering around the crucial 6.75% mark.

The benchmark 6.94% 2036 bond yield is expected to trade between 6.72% and 6.78%, a private bank trader said, having closed at 6.7563% in the previous session.

Bond yields move inversely to prices.

“Until we have stronger triggers, the yield will continue to be rangebound within the 6.70%-6.80% band,” the trader said.

Underlying sentiment remains supportive of a bond rally as foreign investors continue to be aggressive buyers, net buying $3.4 billion since the start of June, according to clearing house data.

Inflows under the Fully Accessible Route continue to pour in after New Delhi and the central bank announced measures to attract foreign capital and support the rupee, boosting the chances of domestic bonds being included in Bloomberg’s Global Aggregate Index.

The 10-year bond yield tumbled 26 basis points in June, its steepest monthly fall since July 2019, and it had also briefly dropped to 6.70% on Tuesday.

Profit-taking at those levels, however, pushed the yield back towards 6.75%, where it has since stabilised.

Meanwhile, the benchmark Brent crude hovered around $70 per barrel in Asian hours, after Qatar said Iran and the US had made “positive progress” in indirect talks that concluded on Wednesday, focused on the Strait of Hormuz, which handled one-fifth of global oil supply before the war.