MUMBAI: Indian government bond yields are expected to be largely unchanged in early deals on Friday, as market participants await fresh debt supply through the weekly auction.
The yield on the benchmark 10-year bond is likely to move between 6.36% and 6.38% till the debt auction, a trader at a private bank said, after closing at 6.3735% on Thursday.
New Delhi will sell 15-year and 40-year bonds worth a cumulative 320 billion rupees ($3.65 billion) later in the day.
“We are unlikely to see any major movement before the auction, and there could be some reaction based on the demand as well as the cutoffs,” the trader said.
Still, the way benchmark bond yield is protected around 6.38%, any attempt to go past it may not be successful, the trader added.
Major focus would remain on the Reserve Bank of India’s monetary policy decision due on August 6, in which the authority is expected to maintain status quo on rates, according to a majority of the economists polled by Reuters.
A drop in June retail inflation to a more than six-year low had led to an increase in August rate cut bets.
However, these bets dropped after RBI Governor Sanjay Malhotra said the bar for further easing is now higher than it would have been if the stance was still “accommodative”.
The central bank changed its stance to neutral while cutting the benchmark interest rate by 50 basis points at its last meeting in June.
Meanwhile, the Federal Reserve maintained status quo on interest rates earlier this week, and hawkish commentary from Chair Jerome Powell reduced the chances of a rate cut in September.
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