MUMBAI: Indian government bond yields remained flat Tuesday morning as traders stayed put ahead of the keenly awaited union budget announcement, waiting for the annual financial blueprint to set the tone for the next set of directional cues for the market.

The benchmark 10-year yield was at 6.9637% as of 09:57 a.m. IST, against its previous close of 6.9633%.

This is the first major policy decision from Prime Minister Modi’s Hindu nationalist Bharatiya Janata Party since it failed to secure a majority in the election last month, making it dependant on allies to form a government.

The budget will seek to lay out an economic vision that balances fiscal prudence with the expectations of disgruntled voters and the demands of his coalition partners.

For fixed income investors, major focus would remain on fiscal deficit target and gross borrowing, while a median forecast in a Reuters poll showed the fiscal deficit target at 5.1% and gross borrowing at 14.13 trillion rupees ($168.95 billion), the same as February’s interim budget.

Still, many market participants have said the government has room to cut fiscal deficit aim by 10-20 basis points and borrowing by around 500 billion rupees amid strong cash position.

Parul Mittal Sinha, India head of financial markets at Standard Chartered Bank expects the fiscal deficit aim to remain unchanged at 5.1%.

Even if the fiscal deficit target is maintained, the government will have room to revise the gross borrowing lower by around 500 billion rupees on account of higher cash balance brought forward from the previous fiscal year, which was not accounted for in the interim budget, Sinha said.

India bonds not reacting to strong domestic growth, yields little changed

New Delhi took a more cautious stance than private economists on the outlook for growth this fiscal year, according to the annual Economic Survey released on Monday.

Meanwhile, the 10-year US yield was around 4.25% with traders awaiting Federal Reserve policy decision next week.