Major moves in bond yields were capped as traders await state debt supply as well as growth data, due later in the day. The 10-year benchmark 7.26% 2032 bond yield was trading at 7.4360% as of 10:00 a.m. IST, after closing at 7.4533% on Monday, which was its highest level since Nov. 4. The yield has risen 11 basis points (bps) in the last seven sessions. "State-run banks may have been adding as these levels are attractive for them, and we do not have any fresh central government supply in March, which could limit the upward move," a trader with a state-run bank said.
Indian states aim to raise 328.33 billion rupees ($3.97 billion) through the sale of bonds and the quantum is at its highest in 11 months. Heavy supply comes after the central government's dated borrowings have ended for the financial year, but investors remain worried about 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 RBI's 6% upper tolerance level for the first time since October. The RBI had raised the repo rate to 6.50% earlier in the month and kept the door open for more tightening, highlighting inflation concerns.
Market participants also await growth data for the Oct-Dec 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 RBI. The economy expanded 13.5% in April-June before moderating to 6.3% in July-September. ($1 = 82.6990 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Sonia Cheema)
