MUMBAI: Indian government bond yields were marginally lower in the first session of the new quarter, as a breach of a key technical level for the benchmark has led to value purchases from investors.

The benchmark 7.26% 2033 bond yield was at 7.1087% as of 10:00 a.m. IST, after ending the previous session at 7.1166%, the highest since April 28.

The yield posted its biggest single-session jump since Nov. 3, 2022, to clock a rise of 13 basis points (bps) for June, after easing for the last three consecutive months.

Indian benchmark yields stuck near key level, await fresh cues

“Fundamentally, nothing much has changed, but since we are at the start of a new quarter and bonds were in an oversold zone on Friday, there is some pullback,” a trader with a private bank said.

“Also the fact that benchmark has crossed 7.08% is encouraging fresh buying.”

Strong tax collections also aided market mood. The government’s fiscal situation seemed strong after goods and services tax collections rose nearly 12% year-on-year to 1.61 trillion rupees ($19.65 billion) in June.

Bond yields jumped on Friday, tracking a spike in US yields and due to weaker-than-expected demand for the benchmark note at the weekly auction.

US yields jumped and have remained elevated, with the 10-year note trading close to the crucial 3.84% mark, while the two-year yield, a closer indicator of interest rate expectations, traded at 4.91%.

The inversion continues to stay above 100 bps, as strong data has increased the bets of further Federal Reserve rate hikes. The odds of an increase in July surged to around 84%.

Still, market participants expect Indian bond yields to continue the rise witnessed in June amid a strong line-up of debt supply and as chances of a rate cut before the first half of next year look unlikely.

This quarter, New Delhi plans to raise 4.47 trillion rupees through bond sales, while states aim to raise 2.37 trillion rupees.