Indian bond yields seen little changed before debt supply
By Dharamraj Dhutia
MUMBAI, June 2 (Reuters) -Indian government bond yields are expected to move largely unchanged in the early session on Friday, as traders await fresh supply via weekly debt auction.
The 10-year benchmark 7.26% 2033 bond yield IN072633G=CC is expected to be in the 6.98% to 7.02% range till the debt auction, after closing at 6.9824% in the previous session, a trader with a private bank said.
New Delhi aims to raise 330 billion Indian rupees ($4 billion) through the sale of bonds later in the day. The auction includes 140 billion rupees of the benchmark paper.
"Since the benchmark yield has again moved below the 7% mark, today's auction would be interesting to see where the investor comfort lies," the trader said.
"This would also be the last auction before the central bank's monetary policy decision, and will give an idea of market expectations."
The Reserve Bank of India (RBI) is scheduled to announce its monetary policy decision on June 8. It had surprised the market with a status quo on rates in its April policy.
Most market participants expect the RBI to keep the repo rate unchanged at 6.50%, considering the moderating inflation and still-resilient domestic economic activity.
Bond yields have eased over the last couple of sessions, tracking a sharp decline in U.S. yields and as odds that the Federal Reserve will maintain a pause in June policy jumped.
The 10-year U.S. yield fell further on news of an extended drop in new manufacturing orders and lower labour costs, while a debt-ceiling bill advanced in Washington. It was trading at 3.61%, down over 20 basis points from its recent high.
The odds that the Fed will pause in June have risen to over 70%, which is in sharp contrast to bets of a 25-basis point hike that were in a similar range a few days ago. FEDWATCH
KEY INDICATORS:
** Brent crude futures LCOc1 down 0.2% at $74.43 per barrel, after rising 2.2% in previous session
** 10-year U.S. Treasury yield US10YT=RR at 3.6140%, two-year note yield US2YT=RR at 4.3490%
** India to sell sovereign bonds worth 330 billion rupees
** RBI to set underwriting fees for 330 billion rupees sovereign bond auction
** RBI to conduct 14-day variable rate reverse repo auction for two trillion rupees
($1 = 82.4050 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman
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