India bond yields end up as traders book profits before new 10-year bond sale



By Dharamraj Lalit Dhutia

MUMBAI, Aug 18 (Reuters) - Indian government bond yields ended higher on Thursday, as traders lightened books after strong gains in the previous session, awaiting fresh supplies of a new 10-year bond due for auction on Friday.

The benchmark 10-year government bond yield IN065432G=CC ended at 7.2421%. The yield had dropped 11 basis points to 7.1825% on Wednesday, posting its biggest single-day fall in two months.

"After heavy buying yesterday, it seems there was some profit booking today," said Shrisha Acharya, a fixed income dealer at DCB Bank.

The central government will auction bonds worth 330 billion rupees ($4.14 billion) on Friday, including 130 billion rupees of the new 10-year note, which will replace the existing benchmark in coming weeks. The 10-year bond is expected to see strong demand.

Lakshmi Iyer, chief investment officer for debt and head products at Kotak Mutual Fund expects the yield on the new 10-year bond to be 5-6 basis points lower than prevailing 10-year bond yield IN065432G=CC , which is seen moving in a range of 10-15 basis points from current levels.

Global oil price moves will be watched for cues, Iyer said. India imports bulk of its crude oil requirement.

In the recent past, bond yields have softened tracking fall in crude prices and expectation of further easing in inflation.

"Oil has been a saving grace no doubt in the recent past," Iyer said, adding, "the key trigger is the direction of oil prices – as our sensitivity to this commodity is among the highest."

Brent crude LCOc1 futures were trading largely unchanged at $93.65 per barrel on Thursday, after declining to its lowest level in six months on Wednesday.

India's retail inflation INCPIY=ECI dipped to 6.71% in July, easing for the third month in a row, and missing the 6.78% forecast by economists in a Reuters poll.

On Wednesday, bond buying got a boost from fall in oil prices and comments from Goldman Sachs analysts Danny Suwanapruti and Santanu Sengupta after they pointed to India likely being included in global bond indexes in 2023, which could bring in passive inflows of around $30 billion.

($1 = 79.6775 Indian rupees)
Reporting by Dharamraj Lalit Dhutia Editing by Neha Arora

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.