MUMBAI, June 19 (Reuters) – Indian government bond
yields are expected to fall marginally in early session on
Monday as states plan lower-than-scheduled quantum of debt sale
for the week.
Underlying sentiment, however, remained bearish, after
hawkish comments from central banks.
The benchmark 7.26% 2033 bond yield is
expected to be in the 7.00%-7.05% range after closing at 7.0354%
in the previous session, a trader with a primary dealership
said.
Lower state debt sale comes in as a positive surprise and
should see a couple of basis points move downwards, the trader
said. “But benchmark yield is unlikely to test sub-7% levels
anytime soon.”
Indian states aim to raise 56 billion rupees ($683.68
million) through the sale of bonds on Tuesday, with the quantum
being sharply lower than the scheduled 180 billion rupees.
States had raised more-than-expected funds in the last three
auctions, with borrowing rising sharply to 654 billion rupees,
after remaining low in the first month of the financial year.
Bond yields rose in the second half of last week after the
Federal Reserve hinted at 50 basis points of more rate hikes in
2023. The 10-year U.S. yield was at 3.77%, while the two-year
U.S. yield was at 4.72%.
Still, many market participants expect the Fed to raise
rates only once and then stop the hiking cycle. The odds of a
rate hike in July stand at around 70%.
Traders will keenly eye the minutes of the Reserve Bank of
India’s June meeting due on Thursday.
The central bank had kept interest rates unchanged for the
second consecutive time at this meet, but said inflation needed
to move towards its 4% target and that it would do “whatever is
necessary to ensure that long-term inflation expectations remain
firmly anchored”.
Shorter-end bond yields are expected to continue rising in
the near term due to hawkish guidance from the local as well as
global central banks, with the yield curve likely to flatten
further.
KEY INDICATORS:
** Brent crude futures down 1.4% at $75.55 per barrel,
after rising 1.2% in previous session
** 10-year U.S. Treasury yield at 3.7690%, two-year
yield at 4.7230% Friday
** India aims to switch government securities worth up to 200
billion rupees ($2.45 billion)
($1 = 81.9100 Indian rupees)
(Reporting by Dharamraj Dhutia;
Editing by Sohini Goswami)
Read More: INDIA BONDS-India bond yields may dip on lower state debt sale quantum