MUMBAI: Indian government bond yields ended lower on Wednesday after rising for three straight sessions, as a breach of a key technical level prompted state-run banks to step up buying and more traders to cover shorts.
The benchmark 10-year bond yield ended at 6.4811%, compared with the previous close of 6.4920%, the highest since April 3.
The yield briefly broke a key technical level to hit the day’s high of 6.5086%, where opportune traders re-entered the market, traders said.
These were largely state-run banks that ramped up purchases, which encouraged others to cover short positions, traders said.
“A 100 basis-point premium on the 10-year over the repo rate was uncalled for, so we saw it as a good level to buy,” a trader at a state-run bank said.
Before state-run banks resumed buying, traders were paring positions amid fears of fiscal pressure and high debt supply.
“It seems any selling on account of stop losses is largely over,” said Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank.
Appreciating rupee and softer U.S. yields also aided sentiment, Dash added.
The Indian rupee gained 0.31% - its highest intraday gain since July 3 - and closed at 87.4400, compared to Tuesday’s 87.7125.
Indian government bonds fall as fiscal fears trigger selloff
The 10-year U.S. Treasury yield was trading at 4.2539% in Asian hours, about 4 basis points lower than the previous session.
New Delhi is set to sell 280 billion rupees ($3.20 billion) of 5-year and 30-year bonds on Thursday, which will be closely watched to gauge demand.
The Indian debt market will remain closed on Friday for a national holiday.
Rates
India’s overnight index swap (OIS) rates dipped on Wednesday, as traders anticipating at least one RBI rate cut in 2025 continued receiving. Lower U.S. yields also supported sentiment.
The one-year OIS rate ended at 5.5% and the two-year OIS rate was at 5.4425%. The liquid five-year OIS rate settled at 5.6425%.