MUMBAI: Indian government bond yields were marginally higher on Wednesday, as traders booked profit after prices rallied for seven straight sessions and as they await fresh triggers.
The benchmark Indian 10-year government bond yield was at 7.2787% as of 0500 GMT, after closing at 7.2613% on Tuesday.
The yield has declined for the last seven sessions, dropping by an aggregate of 22 basis points (bps).
There is some impact of marginal profit taking, but bonds are largely steady and are likely to move in a narrow range throughout the session, a trader with a private bank said.
“We may see some fresh addition of positions around 7.30% levels.”
Bond yields have been falling as underlying market sentiment turned bullish after inflation in India and the US eased in October.
India’s annual retail inflation eased to a three-month low of 6.77% in October from the September reading of 7.41%. Lower reading has raised hopes that the Reserve Bank of India (RBI) may slow down its pace of rate hikes.
The RBI has already raised rates by 190 bps since May to 5.90%, as it battles to rein in inflation that has stayed above its 2%-6% tolerance band for 10 straight months.
Indian bond yields little changed as Oct inflation meets estimates
ICICI Securities Primary Dealership has assigned a 20% probability for another 50 bps rate hike in December and said such a hike will also provide RBI more options to manage policy in February, including a pause, depending on how global and domestic variables evolve.
New Delhi will raise 300 billion Indian rupees ($3.68 billion) via the sale of bonds on Friday, while the RBI will auction Treasury Bills worth 220 billion Indian rupees later in the day.
Meanwhile, the 10-year US yield eased to 3.80% on Tuesday on safe-haven demand after reports of blasts in Poland, which Ukraine and Polish authorities said were caused by Russian-made missiles, raised fears about greater geopolitical risks in the region.
US producer prices, which increased less than expected in October, also led to a fall in Treasury yields.
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