Govt bond yields decline, end flattish for week with eyes on budget 2024

Indian government bond yields ended lower on Thursday after stronger-than-expected demand at the weekly debt auction, and were largely unchanged for the second straight week as investors await the federal budget for further cues.

The benchmark 10-year yield ended at 7.1760%, following its previous close at 7.1835%. Indian markets are shut on Friday for a holiday.
 

"Market is bullish going into the budget, and we are not expecting any major negative surprises," said Ajay Manglunia, managing director and head of the investment grade group at JM Financial.
 

New Delhi raised Rs 330 crore ($3.97 billion) through a sale of bonds earlier in the day, and the benchmark bond likely witnessed strong demand from state-run banks as this was the last auction before the budget announcement on Feb. 1.
 

India's government may keep its gross market borrowing for 2024/25 close to this fiscal year's level as it looks to rein in borrowings, two government sources told Reuters.
 

The government may target gross borrowing between Rs 15 trillion to Rs 15.50 trillion.
 

"The government is serious about reducing its market borrowings this fiscal year," one of the officials said.
 

A Reuters poll had pegged fiscal deficit as a percentage of GDP to 5.30% in 2024/25 from 5.90% this fiscal, and gross borrowing of  Rs 15.60 trillion, up from Rs 15.43 trillion.
 

Meanwhile, U.S. yields continued to remain elevated, with the 10-year yield hovering close to the key 4.20% level after a strong business activity reading, and before key data on Thursday and Friday, and the Federal Reserve meeting next week.
 

Strong economic data has led to the trimming of bets over the timing and pace of Fed rate cuts in 2024. The odds of a first rate cut by March have eased to 43% from 56% on Jan. 17, according to the CME FedWatch Tool.