The 10-year benchmark 7.26% 2032 bond yield is expected to be in a 7.26%-7.32% range after closing at
7.2897% on Wednesday, its lowest level in two months, a trader
with a private bank said. Indian markets were shut on Thursday.
India's federal government plans to borrow 8.88 trillion
rupees ($108.24 billion)- slightly above expectations - via
bonds in April-September and the planned borrowing constitutes
about 57.6% of the total 15.43 trillion rupees planned, the
government said on Wednesday.
"The borrowing is just slightly above expectations, and
should lead to some initial negative reaction for the day, the
trader said.
"Mutual funds and insurers are likely to chase five-year to 14-year bonds, so we should end the day lower."
The heavy net supply in April-September, with concentration in the far-end of the curve, is expected to bear-steepen it. The 10-year yield is expected to trade in 7.25%-7.50% range in the near term, analysts at Kotak Mahindra Bank said in a note.
Mutual funds and insurance companies have been buying government bonds this week, after amendments to the finance bill said India will tax investments in debt mutual funds as short-term capital gains, and returns from some policies would be taxed from April.
After the fiscal year-end close, traders will shift their focus on the Reserve Bank of India's (RBI) monetary policy decision due on April 6. The RBI will raise the interest rate by 25 basis points and then pause for the rest of the year, according to a Reuters poll of economists, who said the central bank would still maintain its tightening stance. The central bank has so far raised the repo rate by 250 bps to 6.50% in the current financial year. KEY INDICATORS: ** Brent crude futures contract was up 0.2% at $79.40 per barrel after rising 1.3% in the previous session ** 10-year U.S. Treasury yield was at 3.5696% and two-year note was at 4.1319% ($1 = 82.0370 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Nivedita Bhattacharjee)
