The benchmark 10-year government bond yield ended at 7.2318%.
Mumbai:
Government bond yields ended higher for the second straight session on Friday, as weekly auctions added to the credit supply, while higher US Treasury yields dampened appetite.
The benchmark 10-year government bond yield ended at 7.2318%. The yield closed two basis points higher at 7.2146% on Thursday. The 10-year 7.26% 2032 bond yield ended at 7.2135% after ending Thursday at 7.1859%.
India raised Rs 330 billion ($4.14 billion) through bond auctions, including Rs 130 billion of the 7.26% 2032 note, which is expected to replace the current benchmark paper soon.
However, the Reserve Bank of India partially transferred seven-year bonds at primary dealers, reflecting weak tenor demand.
Ritesh Bhusari, Deputy General Manager, Treasury, South Indian Bank said, “The fundamentals are weak and this was reflected in today’s movement.”
“The only thing stopping any major jump in yields is speculation of early progress to include Indian bonds in global indices.”
A government official said on Thursday that India wants global bond index operators to consider local settlement of its government securities, if they are involved.
Meanwhile, US Treasury yields remained in upward momentum, with the 10-year yield hovering near 3.25%, its highest level in two months, ahead of non-farm payrolls data due Friday.
Investors are expecting a strong jobs report, which could prompt more aggressive monetary tightening by the US Federal Reserve.
Traders said a major rate hike from the Fed could prompt a similar move by the RBI on September 30.
RBI has increased the repo rate by 140 bps to 5.40% in May-August.
Earlier in the day, a member of RBI’s Monetary Policy Committee (MPC) said the success of interest rate hikes to control inflation is not yet clear, and the pace of rate adjustments will depend on the state of the economy.
MPC member JR Verma told Reuters Trading: “If there is strong economic growth, we would like to accelerate the reduction in (inflation) to 4%. But, if the economy is struggling, a slower pace of adjustment would be appropriate.” ” India Forum.