The 10-year benchmark 7.26% 2032 bond yield is expected to trade in 7.37%-7.42% band, a trader with a private bank said, after closing 4 basis points (bps) higher at 7.3889% on Friday. Bond yields rose on Friday after the Reserve Bank of India (RBI) devolved a bulk of the 10-year bond on primary dealers at an auction.
"The devolvement by the RBI at such a level for was very surprising, and will dampen overall sentiment," said Debendra Kumar Dash, senior vice president, treasury, at AU Small Finance Bank. "While the sentiment has taken a hit on Friday after the devolvement, it is unlikely to result in any sharp yields movement as we are nearing the end of FY23 auction calendar," the trader said.
The government raised 280 billion rupees ($3.38 billion)through debt sale on Friday, its penultimate sale for the current financial year. Market participants will also track the movement in the U.S. Treasury yields and oil prices for cues.
U.S. Treasury yields fell a bit on Friday after the 10-year
note hit a three-month high, as the market placed greater odds
that the Federal Reserve would keep interest rates higher for
longer in its fight against persistent inflation.
Market sentiment had turned cautious after a spike in India
and U.S. retail inflation rates, cementing bets of more rate
hikes.
The Fed has raised interest rates by 450 bps since 2022 and
is widely expected to further raise them by 50 bps over the next
three months. The RBI has raised the repo rate by 250 bps since
2022 to 6.50%.
KEY INDICATORS:
** Brent crude futures up 0.3% at $83.26 per barrel,
after falling over 2.5% in the previous session
** 10-year U.S. Treasury yield was at 3.8280% on
Friday and two-year note at 4.6230%
** The U.S. markets shut on Monday for Presidents' Day
($1 = 82.7500 Indian rupees)
(Reporting by Bhakti Tambe; Editing by Rashmi Aich)
