Thursday, October 6

Yields seen little changed ahead of debt supply

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MUMBAI — Indian government bond yields are seen little changed in early deals on Friday as traders await fresh supply of debt via a weekly auction.

The benchmark 10-year government bond yield is seen in a 7.12%-7.17% band until the auction, a trader with a private bank said. The yield fell 5 basis points to 7.1353% on Thursday.

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“We have already seen a very sharp rally in prices and today’s supply should act as a speed breaker,” the trader said. “Having said that, we expect the auction to go through easily as sentiment is positive.”

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The Indian government is seeking to raise 320 billion rupees ($4.02 billion) by selling bonds, including liquid five-year and 14-year papers, later in the day.

Meanwhile, Brent crude futures remained below $90 per barrel on worries that central banks’ aggressive rate hikes and China’s COVID-19 curbs would hurt demand.

Falling oil prices could help India bring down its inflation as the country is a major importer of the commodity.

Market participants in India are awaiting August retail inflation data due on Monday for further direction. A Reuters poll of economists predicts the reading to rise to 6.90% from 6.71% in July.

Bonds have rallied recently on hopes of inclusion in global indexes. Earlier this month, Morgan Stanley said it sees a “good chance” of JPMorgan including Indian government bonds in its emerging markets index.

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Meanwhile, the 10-year US Treasury yield rose above 3.30% again on Thursday after Federal Reserve Chairman Jerome Powell reiterated that the US central bank’s priority is to tackle inflation, before highly anticipated consumer price data is due next week. KEY INDICATORS: ** Brent crude futures up 0.1% at $89.25 per barrel ** Ten-year US note yield at 3.3170% ** RBI to set underwriting fees for 320 billion rupees weekly bond auction ** India to sell federal government bonds worth 320 billion rupees ($1 = 79.6670 Indian rupees) (Reporting by Dharamraj Lalit Dhutia; Editing by Subhranshu Sahu)

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