Indian bond yields flat as traders seek directional cues

Indian bond yields flat as traders seek directional cues

Indian government bond yields were flat in the early session on Wednesday, as traders pause purchases to assess the outlook on yields and look out for fresh triggers for further directional moves. The benchmark 7.26% 2033 bond yield was trading at 7.0704% as of 10:00 a.m. IST after ending the previous session at 7.0566%.

“At 7.05%-7.06% levels for the benchmark, most would not be entering major longs, as all positives seem to be factored in, and hence we may be in for a couple of days of sideways trading,” a trader with a state-run bank said. Bond yields have been easing recently, tracking sharp receiving in overnight indexed swap (OIS) rates amid strengthening bets of the U.S. Federal Reserve pausing its rate hike cycle after July.

The next major trigger would be the Fed policy decision due on July 26, where markets will focus on the guidance provided by Chair Jerome Powell, with a 25 bps rate hike already factored in. The odds of a 25 bps hike in July remain around 92%, but that of another hike after that have come down sharply.

Back home, traders await treasury bill supply, with the central bank selling notes worth 240 billion rupees ($2.92 billion) later in the day. New Delhi will also raise 310 billion rupees through the sale of bonds on Friday, which includes 140 billion rupees of a new 14-year bond, with traders expecting cutoff yield in the 7.13%-7.18% range.