"After the selloff yesterday, we may see some consolidation in the 7.45%-7.47% band, with a focus on demand for state debt at the auction," the trader said.
Indian states aim to raise 328.33 billion rupees ($3.97 billion) through the sale of bonds; the quantum is at its highest level in 11 months.
Heavy supply comes at a time when investor appetite is weakening on fears of higher inflation and more rate hikes from the Federal Reserve and the Reserve Bank of India (RBI).
Retail inflation surprised on the upside in January with the reading at 6.52%, above the central bank's 6% upper tolerance level, highlighting the need for more hikes.
The RBI raised the repo rate for a sixth consecutive time to 6.50% in February and kept the door open for more tightening. J.P. Morgan, in a note, said the RBI's work is not done just as yet. "We expect another 25 bps rate hike in April," it said.
Market participants also await growth data for the
October-December quarter. The Indian economy likely grew 4.6%
year-on-year, according to a Reuters poll of economists, on weak
global demand and monetary tightening by the Reserve Bank of
India.
The economy had expanded 13.5% in April-June before
moderating to 6.3% in July-September.
KEY INDICATORS:
** Brent crude futures contract was little changed at
$82.40 per barrel, after easing 0.9% in the previous session
** 10-year U.S. Treasury yield was at 3.9238% and
the two-year note at 4.7928%
** Indian states to raise 328.38 billion rupees via sale of
bonds
** India to release October-December economic growth data
($1 = 82.6700 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman)
