India bonds seen little changed with traders eyeing fresh cues

MUMBAI: Indian government bonds are likely to be steady at the start of the week, amid a lack of significant catalysts, with persistent foreign inflows underpinning sentiment.

The benchmark 6.94% 2036 bond yield is expected to trade between 6.70% and 6.74%, a private bank trader said, after ending at 6.7108% on Friday.

Bond yields move inversely to prices. The 10-year bond yield dropped 6 basis points last week, posting its sixth consecutive weekly decline.

It has fallen by an aggregate of 34 bps over the past six weeks.

“We do not have any major data releases in India or the United States during the week, barring the minutes of the latest Federal Reserve meeting, and hence yields may remain in a narrow range through this period,” the trader said.

Last month, the Fed left interest rates unchanged but revised the median forecast to indicate one rate hike before the end of 2026.

The minutes would be released on Wednesday, with traders watching out for more clarity on the interest rate path.

The probability of a rate hike in September stood at 53%, while the odds rise to 77% for December.

Back home, relentless foreign purchases are expected to continue supporting sentiment, with overseas investors buying more than 346 billion rupees ($3.63 billion) in the last five weeks since June 1, including record monthly inflows last month.

Inflows under the Fully Accessible Route have remained strong after New Delhi and the Reserve Bank of India announced measures to attract foreign capital and support the rupee, boosting the prospects of domestic bonds being included in Bloomberg’s Global Aggregate Index.

Oil prices also eased, after the Organization of the Petroleum Exporting Countries and their allies including Russia known as OPEC+ agreed to further increase output targets by 188,000 barrels per day from August.