MUMBAI – Indian government bond yields are set to end the financial year with a downward move as the government’s planned borrowing from the market in the first half was sharply lower than estimated, favouring bullish positions.
The benchmark 10-year yield was at 7.0387% as of 10:30 a.m. IST on Thursday, following its previous close of 7.0694%.
Indian markets will be closed on Friday for a holiday.
“As expected, there was a gap down in benchmark yield at open, with borrowing figure taken as a large positive and after the initial few deals, we are seeing some consolidation below 7.05% levels,” the trader said.
New Delhi aims to borrow 7.50 trillion rupees ($89.97 billion) through a bond sale in April-September, which is 53% of the annual borrowing target, while the market had pegged a much higher figure.
The government will borrow 3.21 trillion rupees via the sale of Treasury bills in April-June, which is also below market expectations.
Kotak Mahindra Bank said it sees room for the yield curve to steepen in April-September as it expects liquidity to shift in surplus, with lower supply in six-months to seven-year bonds and higher supply for the 10-year and above maturity papers.
“We expect the 10-year yield to range between 6.85-7.15% in April-September,” Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said.
Market participants now await the state debt auction calendar for the April-June quarter.
Sentiment has turned more bullish, so much that market participants are not reacting to global index provider FTSE Russell deferring the inclusion of Indian government bonds yet again, traders said.
“Market does not care about inclusions in indexes that have a lower magnitude in terms of inflows as demand-supply dynamics are favourable already,” a trader with a primary dealership said.
Meanwhile, the 10-year U.S. yield continued to remain above the 4.20% mark, as traders assess the timing and extent of U.S. rate cuts in 2024. ($1 = 83.3630 Indian rupees)
