scorecardresearchBond yields little changed after recent fall, Friday's debt sale eyed

Bond yields little changed after recent fall, Friday's debt sale eyed

Updated: 17 Nov 2022, 04:27 PM IST
TL;DR.
  • New Delhi is set to raise 300 billion Indian rupees ($3.68 billion) through a sale of bonds on Friday, which includes liquid five-year and 14-year bonds.
The benchmark Indian 10-year government bond yield ended at 7.2808%, after closing at 7.2736% on Wednesday.

The benchmark Indian 10-year government bond yield ended at 7.2808%, after closing at 7.2736% on Wednesday.

(Reuters) - Indian government bond yields ended little changed on Thursday, amid consolidation after the recent fall, while traders now await a fresh supply of debt via weekly auction on Friday.

The benchmark Indian 10-year government bond yield ended at 7.2808%, after closing at 7.2736% on Wednesday. The yield had declined for seven straight sessions till Nov. 15, dropping by an aggregate of 22 basis points (bps).

New Delhi is set to raise 300 billion Indian rupees ($3.68 billion) through a sale of bonds on Friday, which includes liquid five-year and 14-year bonds. Traders will monitor this auction.

"Market expectations of terminal rate are at 6.25%/6.50%, and inflation is expected to have peaked," said Vikram Chopra, a fund manager at DSP Investment Managers.

"However, there are still factors at play that need to be watched. Oil prices are one… market will continue to look ahead at inflation internals in case they remain sticky above the higher end of RBI's band."

Bond yields eased earlier in the session, following a drop in U.S. yields and oil prices, but failed to stay below the crucial 7.25% level.

Longer-tenor U.S. yields fell on Wednesday and an inversion of the yield curve deepened further after a strong retail sales report boosted expectations that the Federal Reserve may continue hiking rates, which could put economic growth at risk.

The 10-year U.S. yield eased by over 10 bps to 3.70% on Wednesday, while the two-year yield, which is a more direct indicator of interest rate expectations was at 4.36%.

Oil prices were lower as rising COVID-19 cases in China added to worries over demand from the world's largest crude importer. The benchmark Brent crude contract was 1.1% lower at $91.80 per barrel, after falling 1.1% in the previous session.

The movement in oil prices has a direct impact on local inflation as India is a major importer. The country's retail inflation eased to a three-month low of 6.77% in October, raising bets that the Reserve Bank of India may slow down its pace of rate hikes, after raising the repo rate by 190 bps since May to 5.90%. ($1 = 81.5600 Indian rupees)

 

Article
Role of bonds in the portfolio
First Published: 17 Nov 2022, 04:27 PM IST