MUMBAI: Indian government bonds rose slightly in early deals on Tuesday, tracking a rise in US Treasuries, but the gains may be capped as traders cautiously await clarity on the RBI’s liquidity moves and demand at the upcoming auction.
The yield on the benchmark 10-year bond was at 6.3123% as of 10:10 a.m. IST, compared with previous close of 6.3241%.
The 10-year US Treasury yield was slightly lower at 4.2085% in Asian hours, versus previous close of 4.2260%. Bond yields move inversely to prices.
“The market is not so positive right now, especially after the last auction, but the bonds should remain rangebound this week,” a trader at a state-run bank said.
“The RBI announced the sale of the new 15-year bond, so we will wait to see the demand for the paper in this week’s auction.”
New Delhi is set to sell bonds worth 320 billion rupees ($3.74 billion) on Friday, including 160 billion rupees worth of a new 15-year note.
Last week, the RBI sold the new 10-year benchmark bond at about 7-9 paisa below market expectations.
India bond yields barely changed as traders eye fresh cues
Traders will also keenly watch for any follow-up action from the central bank this week on its variable rate reverse repo operation, which will give more clarity on its liquidity agenda.
The RBI conducted a seven-day VRRR on Friday, withdrawing 850 billion rupees from the banking system, which pushed up the overnight rates.
The weighted average call rate rose to 5.50% on Monday, reaching the central bank’s policy rate for the first time in the financial year. Weighted average TREPS rate also rose to 5.42%.