The yield on the 10-year benchmark bond stood at 6.5464%, after closing at 6.5345% on Friday.
Bond yields rise when prices fall.
Indian states will raise 178 billion rupees ($2.03 billion) through bond sales on Tuesday, sharply lower than the previously planned 309 billion rupees.
While Monday’s interest rate moves showed indifference to the lower supply, the cutoff yields at the auction on Tuesday will be key to gauge investor appetite, traders said.
“The market should be within a certain range this week… we have to wait and see how the auction goes tomorrow,” said Umesh Tulsyan, managing director of Sovereign Global Markets. Hopes for interest rate cuts by central banks are fading as a potential US-India trade deal involving a rollback of rates could make them redundant, Tulsyan added. Market participants are also keeping a close eye on trade negotiations between the US and China, with the Federal Reserve’s policy decision on Wednesday.
U.S. officials on Sunday laid out the framework of a trade deal for President Donald Trump and Chinese President Xi Jinping to pause steeper U.S. tariffs and Chinese restrictions on rare earth exports.
In addition, the Reserve Bank of India held two overnight floating rate repo auctions during the day, worth a total of Rs 1.5 trillion, to shore up liquidity.
The Indian banking system’s liquidity surplus stood at 275 billion rupees as of October 26, after remaining in deficit for most of last week.
PRICES
Indian overnight index swap rates closed slightly higher, following US government bond yields and as sentiment remained cautious.
The one-year OIS rate rose slowly to 5.47%, while the two-year OIS rate was higher at 5.4150%.
The five-year swap rate closed slightly at 5.66%.
($1 = 87.8950 Indian Rupees)
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