MUMBAI: Indian government bond yields are expected to open largely unchanged on Thursday as traders await fresh triggers, including debt supply due on Friday.
The 10-year benchmark 7.26% 2033 bond yield is expected to be in the 6.93% to 6.99% range, a trader with a primary dealership said, after closing at 6.9661% in the previous session.
Yields should move sideways during the day as the market wants to gauge investor appetite at the current levels, which would be visible at Friday’s auction, the trader said.
New Delhi seeks to raise 330 billion rupees ($4.04 billion) through the sale of bonds, and the auction includes 140 billion rupees of the benchmark paper.
Bond yields have eased in May as India’s headline retail inflation declined to an 18-month low of 4.7% in April, from 5.66% in February, with expectations of a further fall towards 4%, a level last seen in January 2021.
This has further cemented bets of a prolonged pause on rates by the Reserve Bank of India after it surprised markets with a status quo in April, against expectations of a 25-basis point hike. Traders speculate yields to ease further on talks of Russian firms’ investing in government bonds.
Russian banks and companies which have trade surpluses with Indian lenders are using those funds to invest in government debt, said Sunil Mehta, the head of the Indian Banks’ Association.
India bond yields little changed amid consolidation post recent drop
Market sentiment also remains positive as traders await the transfer of surplus funds from the RBI to the government, with broad expectations that the quantum could be double the budgeted amount.
Emkay Global Financial Services expects the dividend to be in the range of 800 billion rupees to 950 billion rupees, against an estimated 480 billion rupees.
“The fiscal buffer for the government will be handy, especially as tax buoyancy may undershoot budget estimates,” economist Madhavi Arora said in a note.
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