INDIA BONDS-India bond yields seen flattish at start of event-heavy week

MUMBAI, Jan 29 (Reuters) – Indian government bond yields
are expected to remain largely unchanged in the early session at
the beginning of the week, influenced by key economic events
such as the US Federal Reserve policy decision and the
forthcoming local Federal Budget.

India’s benchmark 10-year yield is expected
to fluctuate in the 7.16-7.20% range on Monday, following its
previous close at 7.1760%, a trader with a primary dealership
said.

“There was some bullish bias on Thursday after strong demand
at the weekly debt auction, but with oil moving sharply higher
and Fed meet and budget announcement due in the week, we do not
expect the 7.15% to be broken,” the trader said.

Bond yields eased marginally after New Delhi raised 330
billion rupees ($3.97 billion) through a sale of bonds. The
benchmark bond saw strong demand from state-run banks at the
last auction before the budget announcement on Feb. 1.

India’s government may keep its gross market borrowing for
2024/25 close to this fiscal year’s level as it looks to
restrain borrowings, two government sources told Reuters.

The government may target gross borrowing of the next fiscal
year between 15 trillion rupees and 15.50 trillion rupees,
against a planned 15.43 trillion rupees in the current financial
year.

Despite being an election year, with the Prime Minister
Narendra Modi seeking a rare third consecutive term in power,
the government is likely to reduce its fiscal deficit by at
least 50 basis points .

A Reuters poll also predicted the fiscal deficit as a
percentage of GDP to decline to 5.30% in 2024/25 from 5.90% this
fiscal year, with projected gross borrowing of 15.60 trillion
rupees.

Meanwhile, U.S. yields stayed elevated as strong economic
data prompted a reduction in bets of the timing and pace of Fed
rate cuts in 2024, with the odds for action in March now
standing at around 48%, down from 87% last month, according to
the CME’s FedWatch Tool.
KEY INDICATORS:
** Brent crude futures 0.4% higher at $83.90 per barrel,
after rising 1.4% in previous session
** 10-year U.S. Treasury yield at 4.1373%, two-year
yield at 4.3489%
** RBI to conduct 2-day variable rate repo auction for 250
billion rupees
($1 = 83.1360 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Dhanya Ann Thoppil)