MUMBAI: Indian government bond yields climbed in the early session on Friday, as US yields resumed their rising trajectory on bets of higher-for-longer interest rates, while the focus remains on the response to the new 10-year bond at the auction.
The benchmark 7.26% 2033 bond yield was trading at 7.1867% as of 10:00 a.m. IST, after ending the previous session at 7.1524%.
New Delhi aims to raise 330 billion rupees (about $4 billion) through the sale of bonds, which includes 140 billion rupees of a new 10-year paper.
The new paper will replace the existing benchmark in the coming weeks, but is unlikely to see a massive premium, traders said. It was last bid at a yield of 7.19% at the when-issued segment of the trading platform.
“Sentiment is back in the bearish zone, with the benchmark closing in on 7.20% again, and (the) somewhat dovish bets after the central bank policy decision have completely reversed,” a trader with a private bank said.
US yields rose on Thursday, on bets that rate cuts may be pushed back after a marginal uptick in retail inflation for July.
The 10-year yield was at 4.12%.
US headline and core consumer prices both rose by 0.2% in July for annual gains of 3.2% and 4.7%, respectively, with core inflation posting its smallest increase in nearly two years.
Indian bond yields eased on Thursday, after the Reserve Bank of India held its key lending rate steady at 6.50% for the third straight meeting, while undertaking temporary liquidity draining steps.
The RBI raised its inflation forecast for the quarter as well as the year, but Governor Shaktikanta Das said that past trends indicate that rising vegetable prices may see a significant correction after a few months.