MUMBAI: Indian government bonds were largely unchanged in early deals on Friday as traders await fresh supply through the weekly auction and the Economic Survey later in the day, and the federal budget announcement a day later.

The 10-year bond yield was at 6.6835% as of 9:45 a.m. IST, compared with its previous close of 6.6803%. New Delhi aims to raise 300 billion rupees ($3.46 billion) through the sale of bonds, which includes a seven-year paper and 10-year green bonds.

“Green bonds could see under-subscription as the market is not comfortable to provide any large “greenium” for the 10-year,” a trader with a primary dealership said.

“But major moves are likely only on Monday once the budget is announced and the market has clarity on borrowing numbers.”

India has been able to raise only 117 billion rupees through green bonds this financial year, against a planned 220 billion rupees.

Still, investors anticipate green bonds to be a part of next fiscal year’s borrowing programme, although with an elongated duration.

Economists in a Reuters poll expect New Delhi to stick to a fiscal deficit target of 4.5% of gross domestic product for the next financial year starting April when it presents the budget on Feb. 1.

They expect gross borrowing of 14.28 trillion rupees, up from the 14.01 trillion rupees for the current year.

India bond yields rise in lead up to domestic inflation data

This marginal rise will be easily absorbed given the improving banking system liquidity and strong inflows into insurance and pension funds, investors said.

The Reserve Bank of India kick-started its mega liquidity infusion package on Thursday with debt purchases worth 200.20 billion rupees.

Yields eased after the RBI favoured longer-duration bonds. Next in line is a $5 billion dollar/rupee buy/sell swap later in the day.

This will be followed by a 56-day variable rate repo on Feb. 7 and debt purchases worth 400 billion rupees later that month.