MUMBAI: Indian government bonds traded in a narrow range in early deals on Friday, as traders awaited the state debt auction and the India and U.S. inflation readings due a day later.
The yield on the benchmark 10-year bond was at 6.4219% as of 10:10 a.m., compared with Friday’s close of 6.4121%.
Government bond yields surged in the final market hours on Friday, after New Delhi approved a large compensation for oil marketing companies, triggering concerns of more fiscal measures by the government.
“A lower-than-expected state debt supply likely triggered some short covering at open, but the yields are expected to remain rangebound,” a trader at a private bank said.
Indian states are set to raise 84.5 billion rupees ($965.44 million) via bonds later in the day, which is lower than what traders had anticipated.
Any large action would be seen only after inflation print, another trader said, expecting the 10-year bond yield to oscillate between 6.38% and 6.43% during the day.
India’s July retail inflation data, which is due at 4:00 p.m. IST on Tuesday, is expected to ease to an eight-year low of 1.76%, down from 2.10% in June, according to a Reuters poll.
The U.S. inflation reading is also due after market hours on Tuesday, which could influence the Federal Reserve’s rate-cut trajectory and have a bearing on the domestic bond market.