MUMBAI: Indian government bond yields were marginally lower in early deals on Tuesday, tracking a drop in US Treasury yields, although the move was limited as traders eyed heavier-than-expected state debt supply.
The yield on the 10-year benchmark note was at 6.7240% as of 10:40 a.m. IST, compared with its previous close of 6.7383%.
“Indian bond yields are down largely due to a drop in US yields,” a trader with a private bank said.
“Still, the market has not shown a major impact as a higher state borrowing planned for today would weigh on overall investor appetite.”
Longer-dated US Treasury yields fell on Monday, extending declines after a weaker reading on the manufacturing sector raised bets of rate cuts from the Federal Reserve in 2025.
The 10-year benchmark US yield was around 4.1150% in Asian hours, which is the lowest level since October 21.
US President Donald Trump’s new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%, launching new trade conflicts with the top three US trading partners.
Indian states are scheduled to raise 505 billion rupees ($5.78 billion) via the sale of bonds on Tuesday, the highest in a year and over 100 billion rupees more than planned earlier.
Traders say large state-run insurers are unlikely to participate aggressively at the auction, which could see cutoff yields rising.
India bond yields may inch up on elevated state debt supply
States are also set to raise another 1.35 trillion rupees this month via bonds, which is likely to widen spreads.
The majority of supply from states will be on the longer end of the curve even as there is tepid demand for long-duration papers.
Demand for longer-duration government bonds has dropped amid uncertainty regarding bond purchases from the Reserve Bank of India in March, especially after the central bank infused liquidity through a three-year FX swap.