MUMBAI: Indian government bond yields were largely unchanged in the penultimate trading session of 2022, as market participants awaited the new year to build fresh positions, while volume stayed thin.

The benchmark 10-year yield was at 7.3107% as of 10:00 a.m. IST, after ending higher at 7.3136% on Wednesday.

“The level of 7.30% is neither attracting short sellers nor encouraging position building at the end of the quarter, and hence the market has been stuck around it for the last few days,” a trader with a primary dealership said.

Bond yields rose marginally on Wednesday, as the 10-year US yield went above the 3.85% level and continued to move around it.

The yield had dropped to 3.40% earlier in the month on bets of a policy pivot from the Federal Reserve, but hawkish commentary and hints of continued rate hikes from the Fed have led to sharp rises in yields.

The Fed has raised interest rates by 425 basis points (bps) in 2022 and is expected to hike rates by another 75 bps next year as it continues its battle against inflation.

The 10-year yield has jumped 235 bps in 2022, the highest ever for any year.

Indian bond yields rise tracking US peers; volume low ahead of year-end

The Reserve Bank of India (RBI) may also be forced to undertake one more rate hike as core inflation has stayed elevated, even as headline retail inflation eased below 6% in November, a first in 2022.

The RBI has hiked the repo rate by 225 bps in 2022 to 6.25%. Traders await debt supply on Friday, in which the government will aim to raise 300 billion rupees ($3.62 billion).

Market participants also await the supply calendar for Treasury Bills as well as state debt for January-March, which should be published by Friday.