India Bond Yields Stay Little Changed As New 10-Year Note Eyed

Thursday,   30-Jul-2020   01:49 PM (IST)

Indian government bond yields were largely steady in the afternoon session, as traders awaited the sale of a new 10-year note at a debt auction tomorrow for further cues. The benchmark 5.79% bond maturing in 2030 changed hands at 99.72 rupees, yielding 5.83% at 1:00 p.m. in Mumbai, against 99.66 rupees yesterday. The Indian rupee was at 74.82 to the dollar against 74.80 in the previous session. “New 10-year bond cutoff would be the next major trigger for bonds, while MPC policy would provide major direction,” a trader with a state-run bank said. Bond yields have fallen in the last two sessions after the government, in a surprise move, announced a new 10-year note, to be auctioned at the weekly debt sale tomorrow. This note will replace the existing benchmark in the coming weeks. New Delhi is set to sell bonds worth at least 300 billion rupees tomorrow, including 180 billion rupees of the new 10-year paper. Underlying sentiment remains cautious, as India's Monetary Policy Committee may not go in for deep rate cuts in the near-term after June’s retail inflation breached the tolerance level. Most traders expect the rate-setting body to opt for a pause at its Aug. 6 meeting. The panel has already cut rates by 115 basis points to a record low of 4.00% in 2020. Moreover, bets of immediate bond-supportive measures from the Reserve Bank of India to absorb New Delhi’s additional borrowing have dwindled. The government has hiked its annual market borrowing for this year by 54% to a record-high 12 trillion rupees and is widely expected to go in for another round of additional borrowing in the second half amid a slump in revenue due to the coronavirus pandemic. India yesterday further eased lockdown restrictions from next month outside the so-called containment zones. Restrictions on movement of individuals during night have been removed. India is the third worst-hit nation by coronavirus, behind the U.S and Brazil, with over 1.58 million coronavirus cases, including 34,968 fatalities. The benchmark Brent crude oil contract was trading 0.8% down at $43.39 per barrel, after climbing 1.2% yesterday. India imports about 85% of its crude oil requirement.