Saturday, December 2, 2023

india: India bond yields inch up before debt sale, US peers rebound

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Indian government bond yields moved higher in early trade on Friday as traders geared up for a fresh debt sale, while a bounce back in U.S. Treasury yields also weighed on sentiment.The 10-year benchmark bond yield was at 7.2923% as of 10:00 a.m. IST, after ending the previous session at 7.2747%. The yield had eased to 7.2399% on Thursday, its lowest level in over a month.

“Demand for debt supply becomes crucial after the reversal in Treasury yields. But, the benchmark should not move above the 7.30% handle, maintaining its thin trading range, unless auction demand shocks,” a trader with a private bank said.New Delhi aims to sell 390 billion rupees ($4.68 billion) of bonds. The auction includes 120 billion rupees of a new seven-year paper and 50 billion rupees of five-year green bonds.

U.S. bond yields rose on Thursday after hawkish remarks from Federal Reserve Chair Jerome Powell, suggesting that the central bank may not be done hiking interest rates just yet.

The Fed is “not confident” that rates are yet high enough to end the battle with inflation, Powell said.

The 10-year U.S. yield moved back above the 4.60% mark, after briefly slipping below 4.50% on Thursday. Meanwhile, oil prices stayed lower on worries over waning demand. The benchmark Brent crude contract was below $80 per barrel, hovering around its lowest levels in over three months.

Easing oil prices is good for large importers like India at a time when the Reserve Bank of India (RBI) is focusing on lowering inflation to its 4% target.

India’s retail inflation data for October is due on Monday, and a Reuters poll predicts the reading at a four-month low of 4.80%, down from 5.02% in September.

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