Thursday, December 8

Bond yields rise, tracking US peers; debt auction weighs

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MUMBAI — Indian government bond yields were higher for a fourth straight session on Friday, tracking a fierce upward trajectory in US yields, while additional supply via the weekly debt auction further weighed on sentiment.

The benchmark Indian 10-year government bond yield was at 7.5121% as of 0435 GMT. The yield had ended at 7.4767% on Thursday.

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It has risen by seven basis points in three sessions.

New Delhi is scheduled to raise 280 billion Indian rupees ($3.38 billion) through sale of bonds later in the day, which includes 120 billion rupees of the benchmark 2032 paper.

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“As expected, there was a minor gap-up opening for yields, and after that they are more or less steady,” a trader with a state-run bank said.

“Traders may not be very active today, considering holidays over the next few sessions, but the cut-offs at the auction will be a crucial insight on investors’ comfort.”

Indian markets will remain shut on Monday and Wednesday for local holidays.

The selloff in US Treasuries continued, with the benchmark 10-year yield rising to its highest since June 2008, and the two-year yield, a more direct indicator of rate expectations, jumping to its highest since August 2007.

US yields jumped as US economic data reinforced investor bets that the Federal Reserve would keep raising interest rates aggressively.

The US Fed has already raised rates by 300 basis points since March and is expected to hike rates by 75 bps in each of its next two meetings.

Traders fear that aggressive hikes may put pressure on the Reserve Bank of India to follow suit. The RBI has raised rates by 190 basis points since May.

Markets will also keep an eye on the rupee’s movement after it hit a record low on Thursday. ($1 = 82.7350 Indian rupees) (Reporting by Dharamraj Lalit Dhutia; Editing by Neha Arora)