MUMBAI: Indian government bonds are expected to fall in early deals on Friday as the local central bank has turned more aggressive in withdrawing liquidity from the banking system and ahead of fresh debt supply.
The yield on the benchmark 10-year bond is expected to trade between 6.31% and 6.35%, a trader at a private bank said, after closing at 6.3156% on Thursday.
The five-year 6.75% 2029 bond ended at 5.9636%. Yields move inversely to prices.
A media report stating JPMorgan is considering a reduction in the weight of Indian government bonds to 8.5% from the current 10% in its emerging market index and has been seeking feedback from clients is also likely to impact demand, pulling down prices.
“There are multiple negative triggers for bonds today, with nothing on the opposite side to balance the impact, and hence we could see a large move of 3-4 basis points in the long end, and may be some more on the shorter end,” the trader said.
New Delhi plans to sell bonds worth 250 billion rupees ($2.92 billion) later in the day, which includes a new seven-year paper.
Meanwhile, the Reserve Bank of India raised the quantum for its seven-day variable rate reverse repo operation to 2.50 trillion rupees, up from 1 trillion rupees last Friday and 1.97 trillion rupees of maturing amount.
The weighted average interbank call money rate rose to 5.36% on Thursday, up 10 bps over the last two sessions.
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