MUMBAI: Indian government bond yields are set to open higher on Friday as the widening conflict with Pakistan weighs on risk appetite.
The benchmark 10-year yield will likely open 1-2 basis points (bps) higher, a trader at a private bank said, after closing at 6.3976% in the previous session.
The 10-year yield rose 10 bps intraday on Thursday, from the day’s low of 6.3093%.
Investors see further upward pressure, expecting the yields to test the 6.50% level if frictions between the two countries worsen.
Pakistan’s armed forces launched multiple attacks using drones and other munitions along India’s entire western border on the intervening night of Thursday and Friday, the Indian Army said in a post on X on Friday.
“Market is going to be extremely volatile as operation Sindoor is expected to continue,” said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap.
Indian bond yields seen steady as traders stay put amid India-Pakistan tensions
“Yields will move depending on the impact and damage on both sides.”
Meanwhile, New Delhi is set to sell bonds worth 320 billion rupees ($3.72 billion) later in the day, while the central bank is set to buy 250 billion rupees of debt as a part of its scheduled open market operation.
The Reserve Bank of India’s debt purchase could provide some relief to the market, but demand for the auction will be tested as people have grown more risk averse, traders said.
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