MUMBAI: India’s long-term government bonds slipped in early deals on Friday, as the debt supply of such notes will further test investor appetite after a selloff in US Treasuries overnight.
New Delhi will sell 160 billion rupees ($1.87 billion) each of a new 15-year bond and a 40-year paper on Friday, amid weak demand for long-term bonds.
The yield on the benchmark 10-year bond was at 6.2981% as of 9:45 a.m. IST, after closing at 6.2875% in the previous session.
“With US yields reversing, demand at the auction becomes more crucial as it will give clarity on investors’ comfort with the levels of long-end,” a trader with a state-run bank said.
US Treasury yields rose on Thursday, ending at 4.34%, which is 15 basis points above the lows hit earlier in the week.
Yields rose after data showed the US created more jobs than expected in June, supporting the Federal Reserve’s stance of going slow in rate cuts.
The probability of a rate cut from the Fed in July tanked to 5%, from 25% before the data, with a 33% chance that the Fed maintains the status quo in September as well.
Meanwhile, short-duration bond yields were little changed, as the central bank did not raise the quantum of liquidity it aims to withdraw from the banking system, surprising many traders.
The Reserve Bank of India will conduct a seven-day variable rate reverse repo for 1 trillion rupees later in the day.
The five-year 6.75% 2029 bond was at 5.9604% after ending at 5.9587% on Thursday.
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