Bond yields may rise before debt auction, new 10-year paper to limit move

Reuters

Bond yields may rise before debt auction, new 10-year paper to limit move

2023 1월 31 일, 오전 12:47 GMT

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By Dharamraj Dhutia

MUMBAI, Jan 31 (Reuters) -Indian government bond yields are expected to rise marginally early on Tuesday ahead of a heavy state debt sale, as the market is likely to remain cautious before the budget announcement a day later.

The rise in yields may be capped, with the government having announced its plan to sell a new 10-year bond later this week.

The benchmark 10-year yield IN072632G=CC could move in the 7.37%-7.42% range, a trader with a private bank said, after closing at 7.4004% on Monday, posting its third consecutive rise.

"We witnessed heavy position cutting over the last two days and some of the spillover effect could be seen today as well," the trader said.

"Still, the new 10-year bond announcement may calm some nerves," he added.

Indian states aim to raise 258.05 billion rupees ($3.16 billion) through the sale of bonds, the second consecutive week where the quantum has risen above the 250 billion rupee mark.

The heavy supply comes a day before the announcement of the federal budget, where bond traders would focus on the fiscal consolidation path and gross borrowing target for the next financial year.

The government is likely to keep its gross market borrowing below 16 trillion rupees for the next year as it does not want to destabilise the bond market with any negative surprises, two sources close to the deliberations said.

A Reuters poll had pegged the borrowing at a record 16 trillion rupees, while some market participants had feared the borrowing to be around 17 trillion rupees.

Meanwhile, India's pre-budget economic survey is likely to peg GDP growth at 6.5% for 2023-24 under the baseline scenario, a source told Reuters, declining to be named since the matter is confidential.

New Delhi will sell 120 billion rupees of a new 10-year bond on Friday. Reuters had reported that the government was planning to launch a new paper with the existing 10-year bond having reached its unofficial upper limit of issuance, a government official had said.

KEY INDICATORS:

** Brent crude futures LCOc1 up 0.3% at $85.20 per barrel, after easing 2% in previous session

** 10-year U.S. Treasury yield US10YT=RR at 3.5458% and two-year note US2YT=RR at 4.2464%

** Thirteen Indian states to raise 258.05 billion rupees through sale of bonds

** India to table pre-budget economic survey

($1 = 81.5730 Indian rupees)

Reporting by Dharamraj Dhutia;
Editing by Sohini Goswami

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Bond yields may rise before debt auction, new 10-year paper to limit move

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