MUMBAI: Indian government bond yields were little changed on Wednesday, continuing to search for strong directional triggers ahead of the government’s planned buyback of securities and a fresh supply of debt later in the week.
The benchmark 10-year yield was at 7.1314% as of 10:00 a.m. IST, following its previous close of 7.1284%.
“We are in the middle of the short-term trading range of 7.10%-7.15% for the benchmark and to move in any direction, traders will have to wait for some fresh push,” a trader with a state-run bank said.
Yields declined on Monday, tracking a drop in US yields, as traders turned optimistic about the Federal Reserve’s rate cuts during the year after weaker-than-expected April nonfarm payrolls data on Friday.
The 10-year US yield has stayed below 4.50% since then, and traders are now pricing in 44 basis points of rate cuts in 2024, up from around 34 bps last week, according to LSEG’s rate probability app.
For the last few weeks, the futures market had factored in just one cut this year amid persistently elevated inflation and strong economic data.
Domestic bond yields also dipped after the Reserve Bank of India said it would buy back bonds worth up to 400 billion rupees ($4.79 billion) on Thursday, which will infuse liquidity in the banking system that has been in deficit over the last few weeks.
The central bank is stepping in to ease liquidity conditions as a national election, which stretches over six weeks, is hurting government spending despite strong tax collections, market participants said.
India bond yields seen consolidating after recent decline
The market also keeping an eye on foreign investors, who have stayed on the selling side over the last few weeks and may wait for the general elections to be completed before meaningfully returning to Indian bonds, traders have said.
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