The yield on the benchmark 10-year note is expected to move between 6.49% and 6.52%, after ending at 6.5101% on Tuesday, a trader at a private bank said.
Bond yields move inversely to prices.
Indian government bonds are poised for a slight gain on Wednesday, with bulls showing favor, although a key resistance level for the benchmark yield could dampen significant gains. Investors are taking a cautious stance as they await Friday’s bond auction for further direction amid the pullback in supply pressure.
“We could see the bond oscillating between some gains and plateauing as traders still avoid big positional calls even as supply pressure has pulled back,” the trader said.
People may be waiting for Friday’s offering to see if the momentum continues, he added.
New Delhi will sell 15-year and 40-year bonds worth a total of 280 billion rupees ($3.15 billion) on Friday. This comes on the back of strong demand for sovereign debt sales on Tuesday, with states planning to raise Rs 2.82 trillion – lower than most market estimates – through bond sales in the December quarter. “Market participants had anticipated higher borrowing (rates) as states typically increase borrowing in the second half of the fiscal year, especially in the third and fourth quarters,” Nuvama Fixed Come Research said.
The supply of the government debt will be further boosted after four major banks in the state increased their internal limits to invest in these securities, per five treasury officials.
Meanwhile, most market participants now expect the Reserve Bank of India to cut rates in December, following Governor Sanjay Malhotra’s move last week.
The RBI kept its policy rate unchanged on October 1, but said low inflation has opened policy space to support growth.
Rates
India’s overnight index swaps (OIS) are expected to remain in a narrow range, awaiting more directional signals after recent declines.
The one-year OIS rate ended at 5.41%, the two-year rate at 5.36% and the five-year rate at 5.6375% on Tuesday.
Main indicators:
** Benchmark Brent Crude Futures rose 0.8% to $65.95 a barrel after being little changed on Tuesday.
**Ten-year US Treasury yield at 4.1288%; Two-year yield at 3.5799%
** RBI to auction Treasury Bills worth 190 billion rupees ($1 = 88.8010 Indian rupees).
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