The benchmark 10-year yield could move in 7.33%-7.38% range till the auction, a trader with a private bank said, after closing at 7.3432% on Thursday. "Broadly, there is caution after the monetary policy. Yields could rise further if there is weak demand at the auction," the trader said. Broader sentiment was bearish after the Reserve Bank of India earlier this week raised the repo rate by 25 bps and left door open to more tightening.
New Delhi aims to raise 300 billion rupees ($3.63 billion)through the sale of bonds later in the day. The auction includes 110 billion rupees of the liquid 14-year note. The supply comes after the government issued green bonds worth 80 billion rupees on Thursday, a majority of which was bought by state-run banks and large state-run insurance company.
Even as the central government bond auction-cycle ends in February, the market remains worried about an elevated gross supply of 15.43 trillion rupees due for the next financial year, various traders have said.
The supply of debt in the coming fiscal year is likely to outstrip demand, pushing up bond yields and prompting the Reserve Bank of India to likely provide support via bond buys, Nagaraj Kulkarni, co-head - Asia rates strategy (ex-China), and head - flows strategy global research at Standard Chartered Bank said. The RBI is likely to raise interest rates once again in April as inflation pressures persist and the U.S. Federal Reserve continues to tighten, analysts said. The RBI has raised rates by 250 bps in this fiscal. KEY INDICATORS: ** Brent crude futures down 0.3% at $84.25 per barrel, after easing 0.7% in the previous session ** 10-year U.S. Treasury yield at 3.6731% and two-year note at 4.4883% ** India to sell sovereign bonds worth 300 billion rupees ** RBI to set underwriting fees for 300 billion rupees of sovereign bond auction ($1 = 82.5500 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Nivedita Bhattacharjee)
