India bond yields little changed ahead of debt sale

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MUMBAI: India government bond yields were largely unchanged on Friday as traders look to debt supply and local inflation data, due later in the day, for further cues.

The 10-year benchmark 7.26% 2033 bond yield was at 7.0258% as of 10:10 a.m. IST, after closing at 7.0234% on Thursday.

The Indian government aims to raise 390 billion rupees ($4.77 billion) through bonds later in the day.

The auction includes 120 billion rupees of liquid 2036 paper and other bonds maturing in 2026, 2030 and 2062.

“Market awaits the auction cut-off to gauge the demand from long-term investors such as pension funds and insurance companies, especially for 2036 bond,” a trader at a private bank said.

After moving in a narrow range, yields eased on Thursday as cooling US inflation suggested that the US Federal Reserve will pause its rate hike cycle. Fed funds futures are currently pricing in a 94.6% likelihood of a pause in June.

The next key trigger for the market is local inflation data, due later in the day.

India’s April inflation likely cooled to an 18-month low of 4.80%, below the Reserve Bank of India’s (RBI) upper tolerance limit for the second consecutive month, according to a Reuters poll.

The RBI had surprised the market with a pause on rates in April when a 25-bps hike was largely expected.

India bond yields flattish ahead of April US inflation data

The repo rate currently is at 6.50%. “If there’s a positive surprise on CPI front with the data coming below broader market consensus, then that could spark a rally with benchmark falling below 7% for some time,” said a trader with a primary dealership.

The benchmark bond yield is expected to move in the 7% to 7.05% band during the session, according to traders.

Source: brecorder