MUMBAI, March 5 (Reuters) – Indian government bond yields are expected to be largely unchanged in early deals on Wednesday, as market participants continue to await fresh triggers at a time when appetite for longer-duration debt is waning.
The benchmark 10-year yield is likely to move between 6.72% and 6.76%, a trader with a private bank said, compared with its previous close of 6.7447%.
“There is hardly any major factor that could lead to any large move in bond yields, and we could see another session with rangebound moves and shallow volumes,” the trader said.
Daily average trading volume in the last four sessions has declined to 366 billion rupees ($4.19 billion), down from 423 billion rupees in the previous four sessions, data from clearing house showed.
Trading interest has diminished with a decline in appetite for longer-duration government bonds, as states are set to sell a large quantum of debt in the last month of the financial year.
Indian states raised 505 billion rupees ($5.79 billion) through a sale of bonds on Tuesday, and are scheduled to sell debt worth another 1.35 trillion rupees in the next three weeks.
A majority of the supply from states is expected to be dominated by long-end bonds.
Demand for longer-duration notes has eased amid uncertainty regarding bond purchases from the Reserve Bank of India in March, after the central bank infused around 870 billion rupees into the banking system through a three-year dollar/rupee swap.
Meanwhile, longer-dated U.S. Treasury yields rose on Tuesday, and extended their rise in Asian trading hours.
The yields had eased earlier on Tuesday as U.S. President Donald Trump’s new tariffs of 25% on imports from Mexico and Canada, as well as the doubling of duties on Chinese imports, could rattle global trading. KEY INDICATORS: ** Brent crude futures were down 0.7% at $71.15 per barrel, after easing 2.1% in the previous session ** Ten-year U.S. Treasury yield at 4.2537%; two-year yield at 3.9843% ** RBI to auction treasury bills worth 330 billion rupees ** RBI to conduct 1-day variable rate repo auction for 250 billion rupees ($1 = 87.2530 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)
