Besides, traders will watch out for the response to auction to gauge if last week's strong demand persists, the trader added.
New Delhi aims to raise 310 billion rupees ($3.79 billion) through the sale of bonds later in the day, which includes the liquid 14-year notes that have been leading the gains in the last few days. Bond yields started a declining trend after stronger-than-expected demand at last week's debt sale, largely led by foreign banks and traders. Meanwhile, the 10-year U.S. yield moved above the 3.50%handle as investors weighed a coming showdown over the U.S. debt ceiling with economic data suggesting inflation could remain sticky. The two-year U.S. yields, which is a closer indicator of interest rate expectations moved back to 4.10% levels, with the odds of a 25 basis-point rate hike by the U.S. Federal Reserve on May 3 rising to above 90% again. The odds had eased to below 80% earlier this week, from above 90% last week.
Indian bond yields will continue to fall this fiscal year as
the Reserve Bank of India is unlikely to hike interest rates any
further, said Ashish Agrawal, head of forex and emerging markets
macro strategy research for Barclays Asia. Post the April rate
pause, "we expect the 10-year yield should ease to the
6.75-7.00% range by the end of this financial year," Agrawal
said.
The RBI maintained the status quo on its policy rate earlier
this month, and easing domestic inflation has cemented bets of a
prolonged pause. India's March retail inflation dropped to 5.66%
and is expected to ease below 5% in April.
KEY INDICATORS:
** Brent crude futures contract 0.2% higher to $78.60
per barrel after rising 0.9% in the previous session
** 10-year U.S. Treasury yield at 3.5261% and
two-year note at 4.0806%
** India to sell sovereign bonds worth 310 billion rupees
** RBI to set underwriting fees for 310 billion rupees sovereign
bond auction
($1 = 81.6950 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Dhanya Ann Thoppil)
