MUMBAI: Indian government bond yields were largely unchanged at the start of the second half of the fiscal year, with the benchmark yield stuck at the key 6.75% level, with traders awaiting the US jobs data for directional cues.
The benchmark 10-year yield was at 6.7552% as of 10:00 a.m. IST on Tuesday, compared with its previous close of 6.7495. The market will remain shut on Wednesday for a public holiday.
“The main trigger is the US jobs data, and till then we may hold around 6.75% levels on the 10-year benchmark,” a trader with a state-run bank said.
The September US nonfarm payrolls report is due after Indian market hours on Friday.
US yields rose on Monday after Federal Reserve Chair Jerome Powell suggested the central bank will take a gradual approach in cutting interest rates, noting monetary policy is not on any “preset course.”
The 10-year yield was around 3.78% in Asian hours on Tuesday, while the odds of a 50-basis-point cut in November dropped to 37% following Powell’s comments, from 53% before. Interest rate futures are still anticipating 70 bps of cuts in 2024, higher than the Fed’s 50 bps guidance.
Meanwhile, New Delhi surprised the markets and announced the auction of a new 10-year bond worth 220 billion rupees ($2.63 billion) on Friday, which will replace the existing benchmark paper soon.
India’s 10-year bond yield hits 31-month low; traders eye debt supply
The outstanding issuance for the current 2034 benchmark bond was around 1.8 trillion rupees, and one more auction could have been accommodated.
“Market is a bit confused at the thinking of the government at the sudden change in issuance pattern for 10-year, which is the most liquid part of the curve,” another trader said.
India will sell bonds worth 6.61 trillion rupees in October-March, which has led to a steepening in the yield curve. Indian states aim to raise 199.42 billion rupees through a debt sale later in the day.
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