MUMBAI: Indian government bond yields are expected to start 2024 with an uptick as a higher-than-expected borrowing schedule from states could weigh on sentiment.
The 10-year benchmark bond yield is expected to move in the 7.15%-7.21% range on Monday after closing at 7.1754% in the last session of 2023, a trader with a private bank said.
The benchmark yield ended lower for the second consecutive month in December and closed the year with a drop of 15 basis points (bps).
“Over the weekend, there was no news on fuel price cut, which was one of the major reasons for Friday’s rally.
Indian bond yields’ dip capped by expected fresh debt sale
Hence, the first session of the new year is expected to witness some selling pressure due to the higher supply calendar,“ the trader said.
Indian states aim to raise 4.13 trillion rupees ($49.65 billion) through the sale of bonds in January-March, the amount being higher than almost every market estimate, and this would be taken as a negative surprise by the markets.
Traders had estimated a calendar of around 3.50 trillion rupees, with some estimates rising to around 3.90 trillion rupees.
Bond yields had ended lower on the last trading session of 2023, while market participants expect foreign inflows that had jumped in October-December to continue rising this year as well and support demand.
Meanwhile, the 10-year US yield stayed around the critical 3.85% level as investors anticipate a mild economic recession in the United States heading into 2024, which could push the Federal Reserve to cut rates from as early as March.
The 10-year US yield dropped more than 100 bps in November-December, after having risen by a similar margin in the first 10 months of the year, leading to a minuscule change on a yearly basis.
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