Indian bond yields seen little changed before debt supply
By Dharamraj Dhutia
MUMBAI, Sept 20 (Reuters) -Indian government bond yields are expected to open largely unchanged on Friday as focus would shift to a fresh debt supply, while sentiment remained positive after the oversized interest rate cut in the U.S.
The benchmark 10-year yield IN071034G=CC is likely to move between 6.74% and 6.77% till the debt auction, compared with its previous close of 6.7577%, a trader with a primary dealership said.
New Delhi will sell bonds worth 310 billion rupees ($3.71 billion) later in the day, which includes 200 billion rupees of the benchmark bond, which would take the outstanding issuance to 1.8 trillion rupees.
"After yesterday's unexpected rally in bond prices, we should see traders taking a breather at least till the auction, but if demand is aggressive, we could see another round of fresh purchases," the trader said.
Sentiment remained supportive for bond bulls after the Federal Reserve on Wednesday kicked off its interest rate cut cycle with a larger-than-usual 50 basis points reduction.
Fed policymakers have projected rates would fall by another 50 bps in 2024, 100 bps in 2025 and 50 bps in 2026, according to an updated dot plot.
However, futures markets are pricing aggressive rate easing, and expect cuts of nearly 75 bps cuts over the next two policy meetings in November and December. FEDWATCH
The U.S. 10-year Treasury yield hovered around 3.70% in Asia hours, after commentary from Fed Chair Jerome Powell was seen as tilting towards the hawkish side.
If the U.S. labour market weakens materially, there would be another leg of steepening of the yield curve. Alternatively, if sentiment stays buoyant and U.S. data improves, the market would reassess the need for further cuts.
KEY INDICATORS:
** Brent crude futures LCOc1 down 0.5% at $74.50 per barrel, after rising 1.7% in previous session
** Ten-year U.S. Treasury yield US10YT=RR at 3.7075%, two-year yield US2YT=RR at 3.5688%
** India to sell sovereign bonds worth 310 billion rupees
** RBI to set underwriting fees for 310 billion rupees of sovereign bond auction
** RBI to conduct 14-day variable rate repo for 250 billion rupees
($1 = 83.6080 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Varun H K
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