The 10-year benchmark 7.26% 2032 bond yield is likely to trade in 7.32%-7.36% band until the auction later in the day, a trader with a private bank said. They had closed at 7.3426% on Thursday.
The cutoff is crucial to gauge investor demand at the auction, but rising U.S. yields are likely to test the bulls today, the trader said.
New Delhi aims to raise 280 billion rupees ($3.38 billion) through the sale of bonds in its penultimate debt auction this financial year. The auction will include 120 billion rupees of 7.26% 2033 bond , which will soon replace the existing benchmark. The five-to-seven-year government bonds look attractive for investments as they will benefit the most from an eventual reversal of monetary tightening, Arun Srinivasan, senior executive vice president and head of fixed income at ICICI Prudential Life Insurance told Reuters. "The best part of the curve right now, is the five-year to seven-year space, from a carry angle."
Meanwhile, the 10-year U.S. yield rose above 3.90% earlier in the day, for the first time in 2023, after the latest unemployment and producer price data raised bets that the Federal Reserve will hike rates higher for longer to combat inflation. The Fed has raised interest rates by 450 basis points (bps) since March 2022, and expectations are that it will further raise them by 50 bps over the next three months. 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 280 billion rupees ** RBI to set underwriting fees for 280 billion rupees of sovereign bond auction ($1 = 82.7420 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Dhanya Ann Thoppil)
