Indian bond yields seen marginally higher before debt supply

Indian bond yields seen marginally higher before debt supply

Indian government bond yields are likely to trend slightly higher in the early session on Friday, as traders brace for a fresh debt sale through the weekly auction, while an uptick in U.S. yields is also seen weighing on sentiment. The benchmark 7.26% 2033 bond yield is expected to be in the 7.07-7.11% range till the debt auction, after ending the previous session at 7.0827%, a trader with a primary dealership said.

“As we have witnessed some caution over the last two days, there could be a similar marginal upmove in local yields, as traders will make way for fresh supply,” the trader said. “Reversal in U.S. yields may also see some position cutting.”New Delhi aims to raise 310 billion rupees ($3.78 billion) through the sale of bonds on Friday, which includes a new 14-year bond.

U.S. yields rose on Thursday, with the 10-year yield trading around the 3.85% mark, following new unemployment and manufacturing data that came in below forecasts, indicating that the economy was not weakening as feared earlier.The initial jobless claims totalled 228,000 for the week ended July 15, a decline from the previous week and their lowest since mid-May.

Traders await guidance from the Federal Reserve at the end of its monetary policy, with the decision due on Wednesday. The odds of a 25-basis point hike stay around 96%, but that of another increase after that have receded. Kotak Mahindra Bank expects the 10-year benchmark bond yield to continue to trade in the range of 7.05%-7.20% in the near term.