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India bond traders eye debt auction demand after hawkish RBI tone



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By Dharamraj Dhutia

MUMBAI, June 9 (Reuters) -Indian government bond market participants will await investor demand as well as cutoffs at the weekly debt auction to gauge direction as yields opened largely unchanged on Friday.

Bond yields rose on Thursday after the Reserve Bank of India's (RBI) monetary policy guidance on inflation subdued sentiment.

The 10-year benchmark 7.26% 2033 bond yield IN072633G=CC was at 7.0213% after closing at 7.0224% in the previous session. The 10-year yield posted its biggest single-session rise in four months on Thursday.

New Delhi aims to raise 390 billion rupees ($4.73 billion) through the sale of bonds later in the day. The auction includes a liquid 14-year and a new 40-year bond.

"As expected, yields are flattish before the debt sale, and had the buying numbers from state-run banks not been so large, we would have moved higher," a trader with a primary dealership said.

State-run banks bought bonds worth more than $1 billion on a net basis on Thursday, their biggest single-session purchase since the RBI delivered a surprise rate hike on May 4, 2022, data showed.

The central bank kept the key lending rate and stance unchanged, but Governor Shaktikanta Das said the RBI needed to move towards the primary target of inflation at 4%, and that it would do "whatever is necessary to ensure that long-term inflation expectations remain firmly anchored".

The RBI expects inflation to average 5.1% in this financial year. Analysts, however, do not see inflation easing sustainably to 4% near term, despite hitting an 18-month low of 4.70% in April.

Overnight indexed swap rates also jumped, as traders pushed back the possibility of any rate cut to 2024.

Meanwhile, the 10-year U.S. yield eased slightly after data showed the number of Americans filing new claims for unemployment benefits rose, suggesting the labour market was cooling, and raised the odds of a pause in rates by the Federal Reserve next week to 75%. FEDWATCH


($1 = 82.4550 Indian rupees)



Reporting by Dharamraj Dhutia; Editing by Sohini Goswami

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