MUMBAI: Indian government bonds are expected to sway in a tight range in early deals on Friday, as traders brace for weekly debt supply later in the day.
The yield on the benchmark 10-year note is seen moving between 6.49% and 6.54%, after ending at 6.5239% on Thursday, a trader at a private bank said.
Traders looking to lap up debt in the auction pared their positions on Thursday, pushing the 10-year yield to its highest level since the start of this month. Bond yields move inversely to prices.
The Reserve Bank of India is set to sell 15-year and 40-year papers, worth a total of 280 billion rupees ($3.15 billion), later in the day.
Some market participants are worried the 10-year yield may test 6.55% if it fails to close below the key technical level of 6.50% even after the auction.
Demand in the auction will be key for this vital breakout, traders said.
“We are expecting to see strong demand in today’s auction so, we should see the 10-year yield close below 6.50%,” a trader at a private bank said.
Separately, traders are awaiting India’s consumer inflation data due Monday, with a Reuters poll of 38 economists projecting a drop to 1.07% in September from 2.07% in August, likely bringing it below the Reserve Bank of India’s 2-6% target range amid continued easing in food prices.
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