INDIA BONDS-Bond yields may rise marginally ahead of state debt supply
Indian government bond yields could inch higher early on Tuesday, ahead of debt supply through the sale of state bonds. The benchmark 10-year yield is likely to move in a 7.31%-7.35%...
MUMBAI, Dec 27 (Reuters) - Indian government bond yields
could inch higher early on Tuesday, ahead of debt supply through
the sale of state bonds. The benchmark 10-year yield is likely to move
in a 7.31%-7.35% band, a trader with a private bank said. The yield ended at 7.3194% on Monday, its highest since Nov.
- The state debt supply is on the heavier side and since it is
towards the fag end of the quarter, there may be some uptick in
yields, the trader said. Indian states are aiming to raise 231.47 billion rupees
($2.80 billion) later in the day, by selling bonds maturing
between eight years and 19 years, and the quantum is largely as
per schedule. States have been borrowing far lesser through bonds compared
to their schedule this financial year, with a difference of
nearly two trillion rupees. Sentiment remains cautious as trading volumes continue to
slump in the last week of the calendar year, and may remain
tepid even on Tuesday, traders have said. Meanwhile, the 10-year U.S. yield stayed around 3.75%, while
the benchmark Brent crude contract was around $85 per barrel,
further adding to the cautiousness. Bond yields have seen an uptick since the Reserve Bank of
India highlighted inflation concerns going into 2023, despite
having raised the key interest rate by 225 basis points in 2022
in its battle to keep inflation within its mandate of 2%-6%. Still, India's bond yield curve looks attractive at the
shorter end as the interest rate tightening cycle is expected to
peak soon, while heavy debt supply in the new year could weigh
on the longer end, said Sudhir Agrawal, executive vice president
and fixed income fund manager at UTI Mutual Fund. "The long end of the curve is going to continue to have this
supply issue all around the year going forward, while the short
end of the curve is just a seasonal phenomenon." KEY INDICATORS: ** Brent crude futures up 0.9% to $84.70 per barrel,
after rising 3.6% in the previous session ** 10-year U.S. Treasury yield was at 3.7303%
and the two-year note at 4.3339% ** Thirteen Indian states to raise 231.47 billion rupees
through the sale of bonds ($1 = 82.6500 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Savio D'Souza)