Indian Bond Yields Slightly Up as States Amplify Debt Sales Amid Profit Booking

MUMBAI - Indian government bond yields saw a slight increase in early trading on Tuesday. This uptick is attributable to the initiation of a more substantial bond sale by states than originally planned. Additionally, ongoing profit booking by investors further dampened the market mood.

The 10-year benchmark bond yield stood at 7.0169% as of 10:00 a.m. IST, a marginal rise from its last closing figure of 7.0147%. Despite this increase, the yield had experienced a 7 basis point reduction over the previous six sessions.

In recent times, bond yields have been on the decline, with the 10-year benchmark dropping to a nine-month low of 7.0056% on Monday. This descent coincides with a fall in U.S. Treasury yields, a trend amplified by weakened economic indicators and expectations of a potential Federal Reserve rate cut.

Market experts anticipate some level of stabilization in the benchmark bond yield, forecasting it to hover within the 7.02%-7.03% range for the day. The focus remains on the unusual heft of the state debt auction.

Indian states are geared up to raise a sum of 355.44 billion rupees (approximately $4.30 billion) through bond sales, exceeding the scheduled amount for the first time in almost two months. This figure also represents the most considerable amount since late March 2023.

On the global front, Monday's drop in bond yields was in sync with the dip in U.S. Treasury yields following less robust economic data and Federal Reserve Chair Jerome Powell's comments, which have fueled speculation of a June rate decrease.

The 10-year U.S. yield has remained below 4.10%, a decline from the recent peak of 4.35%. Investors are currently focusing on the impending U.S. inflation data, which is crucial before the Federal Reserve's policy decision the following week. Current market tools indicate a roughly 69% likelihood of a June rate cut, an increase from 64% the previous week.

In India, the release of retail inflation data for February is also on the horizon, projected to showcase a four-month low, falling to 5.02%, as per the consensus from a Reuters survey.

bonds, yield, inflation