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 declining after stronger-than-expected demand at last week's debt sale, and the fall has been largely led by foreign banks and traders. These banks bought bonds net of 117 billion rupees in the last eight trading sessions, data from the Clearing Corp of India showed.
The foreign banks could be purchasing bonds to build trading positions given the bullish momentum, said Ashish Agrawal, head of forex and emerging markets macro strategy research for Barclays Asia.
Meanwhile, the 10-year U.S. yield moved above the 3.50%handle and the two-year U.S. yield, which is a closer indicator of interest rate expectations slipped to 4.10% levels.
The odds of a 25 basis-point rate hike by the U.S. Federal Reserve on May 3 have risen above 90% again. The odds had eased to below 80% earlier this week, from above 90% last week. 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. Post the April rate pause, Agrawal expects the 10-year bond yield to ease off and trade in the 6.75-7.00% range by the end of this financial year. ($1 = 81.7800 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Dhanya Ann Thoppil)
