MUMBAI: Indian government bond yields witnessed an uptick in early deals on Tuesday, ahead of a holiday, tracking a rise in US Treasury yields, while the benchmark bond yield continued to hold around the par coupon value of 6.79%, a key psychological level.
The 10-year yield was at 6.7831% as of 9:45 a.m. IST, compared with its previous close of 6.7739%. Indian markets are shut on Wednesday for Christmas.
“We are back to 6.79% on the benchmark and yields should consolidate around these levels, but volumes are expected to remain tepid through this week,” trader with a primary dealership said.
Indian benchmark bond yield is seeing resistance at around 6.79% as state-run banks turn likely buyers of bonds around this level, traders have said.
These banks have been large buyers of debt in the recent past as benchmark bond yield shot up 10 basis points in less than three weeks.
US Treasury yields rose overnight, with the 10-year yield reaching its highest level in nearly seven months due to additional supply of debt at a time when many traders are inactive.
Underlying sentiment in the world’s largest economy remained cautious, after the Federal Reserve last week cut its 2025 interest rate cut forecast to 50 basis points from 100 bps.
The odds of a pause in January stood at 91%, according to CME’s FedWatch Tool.
Domestically, traders awaited fresh supply of debt in a holiday-truncated week.
India bond yields rise in lead up to domestic inflation data
Indian states are expected to raise 306 billion rupees ($3.59 billion) through the sale of bonds later in the day, while New Delhi will raise 320 billion rupees through debt sale on Friday.
Bond yields had dipped on Monday, after minutes of the Reserve Bank of India’s latest monetary policy meeting indicated that an interest rate cut in February was possible.
The RBI kept its key interest rate unchanged earlier in the month, but cut banks’ cash reserve ratio to improve liquidity conditions.
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