off-the-wire

INDIA BONDS-Bond yields up as debt auction adds to supply, rise for third week

Kitco Media
By Reuters
Published:
Updated:
Reuters
By Dharamraj Dhutia MUMBAI, Feb 24 (Reuters) - Indian government bond yields ended higher on Friday, as the financial year's last debt auction added to supply, propelling yields to rise for the third consecutive week. The 10-year benchmark 7.26% 2032 bond yield ended at 7.4181%, after closing lower at 7.3905% on Thursday. The yield rose three basis points this week, after rising nine and three basis points in the previous two. "Underlying sentiment remains bearish, as we have a huge supply lined up next year. Liquidity has also tightened," said Soumyajit Niyogi, director, core analytical group, at India Ratings and Research.


"Also, with more rate hikes on the cards, yields should remain under upward pressure."


DBS Bank expects the benchmark bond yield to rise to the 7.50%-7.55% zone in the next quarter. New Delhi raised 260 billion rupees ($3.14 billion) through the sale of bonds, while the cutoff yield for the liquid 14-year paper was higher than expected which further dampened sentiment. The central government's debt auction cycle ended on Friday, but it aims to raise 15.43 trillion rupees through the sale of bonds in the next financial year. The 10-year U.S. yield though off its recent highs, is set to post its third consecutive weekly climb, hovering close to 3.90%.


U.S. yields have gained on bets that the Federal Reserve may hike rates by 75 bps over the next few months. The Fed has raised rates by 450 bps to 4.50%-4.75% since March 2022. Meanwhile, the minutes of the RBI's latest monetary policy meeting reiterated the hawkish stance, while a majority of market participants now expect the central bank to hike one more time in April. Still, Nomura has assigned a 70% probability for a pause in rates, while ICICI Securities Primary Dealership said April rate hike remains a 50-50 call as of now.


The RBI raised its key repo rate for the sixth consecutive time earlier this month, taking it to 6.50%, and left the door open to more tightening.
($1 = 82.7450 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)

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