India Bond Yields Flat As Traders Await Special OMO Outcome

Thursday,   25-Feb-2021   01:51 PM (IST)

Indian federal government bond yields were steady in the afternoon session, as traders awaited the outcome of today’s special open market operation by the Reserve Bank of India. The benchmark 5.85% bond maturing in 2030 changed hands at 97.74 rupees, yielding 6.16% at 1:00 p.m. in Mumbai, against 97.83 rupees and a 6.15% yield at yesterday’s close. The Indian rupee was at 72.45 to the dollar against 72.32 yesterday. “The market is keenly awaiting the result of today’s special OMO for further yield signals, crucial for tomorrow’s auction,” a trader with a state-run bank said. “With a further rise in U.S Treasury yields and crude oil, domestic traders are not as exuberant as they could have been, given the slightly higher amount of special debt purchase by the central bank next week.” Today, the RBI is buying bonds worth up to 100 billion rupees maturing in 2025, 2029 and 2033, while selling short-term notes worth a similar quantum maturing in 2021 and 2022 at a special OMO. Traders expect the RBI to accept the bulk of the offers for the 6.45% 2029 paper at a higher-than-expected price to provide a strong yield signal. It will conduct a similar operation worth up to 150 billion rupees on Mar. 4. New Delhi will sell bonds worth at least 240 billion rupees via a weekly debt sale tomorrow, including 110 billion rupees of the 6.22% 2035 bond, bidding for which will be done via a uniform price auction method. Yesterday, the 10-year U.S. Treasury yield jumped to 1.4350%, the highest in a year, on worries around inflationary pressures, despite Federal Reserve Chairman Jerome Powell’s assurance to continue with an accommodative stance for a long time. The benchmark Brent crude contract was hovering near its highest level in 13 months after U.S. government data showed a slump in weekly crude output as a result of the cold snap in Texas last week. It was last trading 0.6% higher at $67.45 per barrel after rising 2.6% yesterday. India imports nearly 85% of its crude oil requirements. New Delhi will release gross domestic product data for October-December tomorrow. A Reuters poll pegs growth at 0.5% after an economic contraction of 23.9% and 7.5% in the first two quarters.