MUMBAI: Indian government bond yields rose for the third straight session in 2025 as traders await the first debt auction of the New Year, while sentiment remains cautious at the start of a quarter that is loaded with debt supply.
The 10-year bond yield was 6.7976% as of 9:45 a.m. IST, compared with its previous close of 6.7891%. Later in the day, New Delhi will sell bonds worth 320 billion rupees ($3.73 billion), including 220 billion rupees of the benchmark paper.
“Auction cutoffs will determine whether the next move for the benchmark bond yield is above 6.80% or below,” a trader with a private bank said.
Yields have started 2025 with a rising trend as the last quarter of the financial year, which ends in March, is scheduled to witness higher debt supply.
While the central government is aiming to raise 2.79 trillion rupees by end-March, states aim to borrow a record 4.73 trillion rupees, taking the aggregate supply to 7.52 trillion rupees.
States will have to pay an additional premium over central government securities to meet their borrowing targets as spreads are set to widen, investors said.
Bonds prices are finding support amid purchases by foreign investors, whose holding of bonds that are part of JPMorgan’s emerging market debt index have reached a record high.
India bond yields rise in lead up to domestic inflation data
Still, investors expect this year’s inflows to be less than the record purchases in 2024.
Meanwhile, US Treasury yields started the New Year on a flattish trend, with the 10-year yield around 4.57%.
Market participants are keeping a close eye on US yields, especially with President-elect Donald Trump’s inauguration less than three weeks away.
The focus on US economic data also remains as the Federal Reserve has halved its rate cut forecast for 2025 to 50 basis points.
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