India bonds steady with focus on 10-year benchmark bond auction
By Dharamraj Dhutia
MUMBAI, Sept 20 (Reuters) -Indian government bond yields were little changed in early trading on Friday as market participants awaited a fresh debt supply, although sentiment remained positive after the oversized interest rate cut in the U.S.
The benchmark 10-year yield IN071034G=CC was at 6.7477%, as of 10:00 a.m. IST, compared with its previous close of 6.7577%.
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.
"Debt auction would be the real test, as the quantum is decently huge to give a pulse of which direction the yields will move. The cutoffs would decide whether we move to 6.74% or 6.78% again," trader with a state-run bank said.
Indian bond yields declined on Thursday, a day after the U.S. Federal Reserve kicked off its interest rate cut cycle with a larger-than-usual 50 basis points reduction.
Fed policymakers projected another 50 bps of cuts in 2024, and 100 bps in 2025, 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 US10YT=RR hovered around 3.70% in Asia hours, while the two-year yield US2YT=RR was around 3.55%, after commentary from Fed Chair Jerome Powell was seen as tilting towards the hawkish side.
The Fed is likely to continue to monitor labour markets for further action. Markets may have perceived the policy less dovish, and U.S. yields were higher than the lows seen in recent week, said Avnish Jain, Head Fixed Income, Canara Robeco Mutual Fund.
($1 = 83.5875 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Varun H K
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