Govt bond yields steady; traders seek trigger for 10-yr to breach key level

Indian government bond yields were largely unchanged in early trading on Tuesday, with traders eyeing strong triggers for the benchmark yield to breach a key technical level.
 

The benchmark 10-year yield was at 6.9724 per cent as of 10:00 a.m. IST, after closing at 6.9767 per cent in the previous session.

Indian financial markets will be shut on Wednesday for a local holiday.
 

"Market is turning mildly bullish in the run up to the budget announcement but 6.98 per cent is a very strong support level, and any new positive surprise of large buying from some segment of the market is needed to breach this comfortably," a trader with a private bank said.
 

The government will announce the budget on July 23, with major focus on the fiscal deficit target and gross borrowing figures.

India had announced gross borrowing of 14.13 trillion rupees ($169.07 billion) in the interim budget, with a fiscal deficit target of 5.1 per cent of gross domestic product.
 

India has room to cut gross market borrowing by 500-750 billion rupees and reduce fiscal deficit aim to 4.9 per cent, following a better-than-estimated surplus transfer from the central bank and amid strong revenue collections, Neeraj Gambhir, head of treasury at Axis Bank said.
 

The 10-year U.S. yield rose on Monday and was around 4.22 per cent in Asian hours, on growing bets of Donald Trump winning the presidential race after surviving an assassination attempt over the weekend, which could potentially lead to stronger growth, higher inflation and more debt supply.
 

The probability of the Federal Reserve cutting rates in September is now 100 per cent, with a 13 per cent chance of a greater than 25- basis-points cut, according to the CME FedWatch Tool.
 

Back home, New Delhi aims to raise 310 billion rupees through sale of bonds, including 200 billion rupees of the benchmark note on Friday. States will raise 65.90 billion rupees via sale of bonds later in the day.



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