MUMBAI: Indian government bond yields dipped in early trading on Tuesday, as traders built positions after India and Pakistan agreed on a ceasefire over the weekend.
The benchmark 10-year yield was at 6.3303% as of 10:30 a.m. IST, compared with the previous close of 6.3750%.
India and Pakistan called a truce during the weekend, agreeing on a full and immediate ceasefire, which renewed investor interest across asset classes.
“Foreign banks may be leading the buying as tensions around the conflict have subsided,” a trader at a foreign bank said. Foreign lenders sold a record amount of bonds last week, spooked by border tensions.
The yield on the 10-year note is unlikely to breach 6.30% during the day, investors said, adding that it will consolidate around the 6.32% level as the previous day’s rally in US Treasury yields could be capping the drop.
The yield on the benchmark 10-year US Treasury bond rose more than 8 basis points in the previous session. Traders will also be watching for India’s April inflation data, due in the second half of the day.
Indian bond yields set to rise amid widening conflict with Pakistan
Economists polled by Reuters expect the key price gauge to have declined to a nearly six-year low of 3.27%.
Meanwhile, Indian states are set to borrow 115 billion rupees ($1.35 billion) through the sale of bonds later in the day.
India’s banking system liquidity surplus widened to 1.7 trillion rupees as on May 9, the highest level in nearly three weeks.