MUMBAI: Indian government bond yields were marginally higher in early trading on Friday, with the debt auction poised to add to supply and the demand for these notes set to be the next directional trigger for yields.
The benchmark 10-year yield was at 6.8879% as of 10:00 a.m. IST, as compared to its previous close of 6.8780%.
New Delhi aims to raise 310 billion rupees ($3.69 billion) through the sale of bonds later in the day, which includes 200 billion rupees of the benchmark paper.
“The cutoff would determine whether the benchmark yield will go to 6.90% or move back towards 6.85% again,” a trader with a primary dealership said.
The supply comes a day after the Reserve Bank of India kept its key interest rate unchanged, retaining its focus on bringing inflation down even as other major central banks are poised to ease.
The RBI also maintained the status quo on its stance.
There were no major changes in the commentary or projections, leading to a similar reaction from market participants in terms of rate expectations.
QuantEco Research expects the central bank to cut rates by 75 basis points in the upcoming easing cycle, with 50 bps of cuts coming from October to March.
India bonds not reacting to strong domestic growth, yields little changed
“We continue to expect 10-year government bond yield to moderate towards 6.75% levels by March 2025,” economist Vivek Kumar said.
Meanwhile, US yields rose further on Thursday and stayed elevated in Asian hours on Friday after data showed jobless claims were lower than expected, calming fears of a recession.
The 10-year US yield topped 4% on Thursday and is up 30 basis points from the low of 3.67% at the start of the week.
The odds of a 50 bps Federal Reserve rate cut in September have dropped to around 56% from 100% on Monday, with futures traders expecting just over 100 bps of cuts in 2024, per the CME FedWatch tool.
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