 "India bond yields dip amid investor demand, post weekly fall before budget")
Indian government bond yields ended lower on Friday, as strong purchases from investors boosted sentiment, while the benchmark bond yield also posted a weekly decline as sentiment was positive ahead of the federal budget announcement.
The 10-year bond yield ended at 6.7206 per cent , compared with the previous close of 6.7341 per cent. The yield fell four basis points this week, the biggest such move in two months.
"It seems long-term investors are adding duration and that has lifted overall sentiment, leading to a fall in yields," a trader with a primary dealership said.
The so-called 'others' category of investors, which includes insurers, pension and provident funds and the Reserve Bank of India as well as some other participants, has bought bonds worth around 140 billion rupees ($1.62 billion) on a net basis this week, clearing house data showed.
They bought around 200 billion rupees on a net basis last week.
India's federal budget announcement, due on Feb. 1, will be the next major trigger for bonds, with its focus on fiscal deficit target and borrowing numbers.
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Market participants expect the government to announce a fiscal deficit target of around 4.4 per cent -4.5 per cent of gross domestic product for fiscal 2026, with gross borrowing in the range of 14 trillion rupees to 14.50 trillion rupees.
However, ICICI Securities Primary Dealership anticipates the Reserve Bank of India will roll over bonds in its portfolio due for maturity in fiscal 2026 with the government via direct swap.
According to the primary dealership, the RBI is expected to swap bonds maturing around 1 trillion rupees with the government. This, along with the repayment of some bonds through GST compensation fund, will push gross borrowing to 13.30 trillion rupees - the lowest in the last four years.
"As far as the upcoming Budget goes the low need for fiscal consolidation should be treated as an opportunity by the government to provide some support to the economy," the primary dealership said.