Bond yields rise for third day on fresh supply, ends flat for week
MUMBAI: Indian government bond yields rose for a third consecutive session on Friday, as debt auction added to supply and rising US yields weighed on sentiment.
The benchmark Indian 10-year government bond yield ended at 7.3077%, after closing at 7.2808% on Thursday. The yield was unchanged this week, after falling 16 basis points (bps) last week.
“US yields saw some reversal which also had an impact on Indian bonds yields. Benchmark was also not able to break the 7.25% mark, which led to profit booking through the week,” said Debendra Kumar Dash, senior vice president, treasury, at AU Small Finance Bank. He expects the benchmark bond yield to move in a narrow range of 7.25%-7.35% for the next few days.
New Delhi on Friday raised ₹300 billion ($3.67 billion) through the sale of bonds, which were well-bid, according to traders.
The 10-year US yield rose above 3.80%, as investors evaluated how high the Federal
Reserve will raise rates as inflation moderates and growth appears to remain strong.
The Federal Reserve’s next policy decision is due on December 14, a week after the Reserve Bank of India’s (RBI) meeting.
The RBI is expected to opt for a lower 35-bps hike next month, after three back-to-back 50-bps hikes.
The benchmark Brent crude contract was set to post its second consecutive weekly fall as concerns over demand rose amid mounting covid cases in China. It was trading at $90 per barrel, and was down 6.3% this week.the movement in oil prices has a direct impact on local inflation as India is one of the largest importers of the commodity. India’s retail inflation eased to a three-month low of 6.77% in October.