Bond yields rise when prices fall.
New Delhi sold 320 billion rupees ($3.56 billion) of the 10-year benchmark bond at a cut-off yield of 6.61%, in line with expectations but 13 basis points higher than the previous auction on December 5.
The ten-year interest rate has risen by 10 basis points in the same period.
During the session an important technical level was also briefly broken, which added to the pressure.
“6.62% is a critical level and if that is breached, we may see 6.70% again,” said Gopal Tripathi, head of finance and capital markets at Jana Small Finance Bank. Over the past seventeen trading sessions, the 10-year yield has broken the 6.62% mark only twice in eight attempts.The focus now is on the January-March borrowing calendar, expected after trading hours on Friday, with investors bracing for a record quarterly issuance of around Rs 5 trillion.
Traders said sentiment has remained subdued due to supply-demand mismatch in the market, but see demand improving once India’s fully accessible route (FAR) bonds are added to the Bloomberg Global Aggregate Index. The market is looking forward to a withdrawal decision later this month.
Rising US government bond yields are also weighing on Indian bonds, traders said.
US 10-year bond yields were trading at 4.1592% in Asian hours, up about 5 basis points over the last three sessions.
RATES The Indian yield curve on overnight interest rate swaps steepened further on Friday, as pressure on longer-maturity swap rates continued.
The one-year OIS rate was little changed at 5.4750%, and the two-year OIS rate rose 2 basis points to 5.5750%. The five-year OIS rate ended 3.5 basis points higher at 5.9550%.
($1 = 89.9620 Indian Rupees)
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