scorecardresearchBond yields tad lower after strong demand for state debt sale

Bond yields tad lower after strong demand for state debt sale

Updated: 27 Dec 2022, 04:25 PM IST
TL;DR.
  • The 10-year benchmark bond yield ended at 7.3077%, after closing at 7.3194% on Monday.
The 10-year benchmark bond yield ended at 7.3077%, after closing at 7.3194% on Monday.

The 10-year benchmark bond yield ended at 7.3077%, after closing at 7.3194% on Monday.

(Reuters) - Indian government bond yields ended marginally lower on Tuesday after staying steady for the last two days, as the state debt sale saw strong demand, though volumes were shallow as a majority of the traders stayed on the sidelines.

The 10-year benchmark bond yield ended at 7.3077%, after closing at 7.3194% on Monday.

"State debt saw decent demand today, despite the quantum being on the higher side. But broadly, bond yields are likely to remain in the thin range for the rest of this week," said Nandan Pradhan, deputy general manager, treasury, at Cosmos Bank.

Indian states raised 231.47 billion rupees ($2.79 billion) through the sale of bonds - the highest quantum for any auction in October-December.

The Reserve Bank of India (RBI) set the cutoff yield on 10-year state notes at 7.60%-7.63%, marginally lower than market expectations. The market is now in holiday mode, with very few trades taking place. Traders are largely refraining from taking positions as it's the quarter-end and there's a lack of volume and fresh triggers, said a trader with a state-run bank.

Trading volume remained shallow as bonds worth around 130 billion rupees were sold till 3:30 p.m. IST, compared to 114.97 billion rupees on Monday, which was the lowest in over a year. Going ahead, market participants expect the yield on the benchmark 10-year bond to move in a narrow range of 7.30%-7.33% till Friday.

Foreign banks have also been on the sell side, as they sold bonds worth nearly 42 billion rupees in the last eight trading sessions on a net basis, after remaining a major buyer in the first half of December.

Meanwhile, the RBI may continue its secondary market bond sales to drain liquidity after having sold debt worth over 100 billion rupees over three weeks to Dec. 16, traders and analysts have said.

 

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First Published: 27 Dec 2022, 04:25 PM IST