Indian bond yields are expected to remain largely unchanged in the early trading session as traders await fresh cues after a mild selloff in the late session on Monday. The benchmark 7.26% 2033 bond yield is predicted to be in the 7.02%-7.08% range after closing at 7.0605% in the preceding session, according to a trader at a primary dealership. The trader explained that since there was not much trading volume, yield inched above the 7.05% handle as the offers increased. The market is now waiting for the minutes of the latest Reserve Bank of India meeting, which will be released on Thursday.
Debendra Kumar Dash, senior vice-president, treasury, at AU Small Finance Bank, anticipates that if there is any bearish commentary in the minutes, the range for the benchmark yield may shift to 7.05%-7.10% band. Additionally, traders will remain focused on commentary from U.S. Federal Reserve speakers this week, including Chair Jerome Powell’s congressional testimonies on Wednesday and Thursday. Last week, the Fed kept interest rates unchanged but warned of a half percentage point hike in 2023. Still, many market participants expect the Fed to raise rates only once, and stop the hiking cycle. The odds of a rate hike in July stand at around 72%.
Meanwhile, Indian states aim to raise INR 56 billion ($683.1 million) through the sale of bonds later in the day, with the quantum being sharply lower than the scheduled INR 180 billion. States had raised more funds than expected in the last three auctions, with borrowing rising sharply to INR 654 billion during the period after remaining low in the first month of fiscal year 2024.
The minutes of RBI meeting would reveal the central bank’s stance on the current inflationary trends and hints of future monetary policy changes. Bond traders would track the upcoming auctions of government debt and keep an eye on the Fed’s announcements on possible interest rate hikes, which could significantly impact the Indian bond market.
