Govt bond yields may partly reverse fall as borrowing plan disappoints

Indian government bond yields are expected to marginally reverse their recent fall in early trades on Friday, after the government kept borrowing target for October-March in line with budget estimates, with no major tweaks in issuance pattern.
 

Traders will also focus on fresh debt supply, while also remaining cautious after rise in US Treasury yields.
 

The benchmark 10-year yield is likely to move between 6.72 per cent and 6.75 per cent till the debt auction, compared with its previous close of 6.7178 per cent, which was lowest since Feb. 21, 2022, a trader with a primary dealership said.
 

New Delhi will sell bonds worth 340 billion rupees ($4.07 billion) later in the day, and the auction includes liquid five-year and 15-year bonds.
 

"We could see some reversal, as yesterday traders had bought aggressively, and since there has been no major bullish surprise in the borrowing calendar, some may look to cut positions," the trader said.
 

India will stick to its budgeted borrowing plan for the current financial year and sell bonds worth 6.61 trillion rupees from October through March, it said on Thursday.
 

The government had projected gross market borrowing of 14.01 trillion rupees for the April-March. Of this, 7.40 trillion rupees is scheduled in first half.
 

"We should see some selling pressure tomorrow, as market was almost unanimous on reduction in borrowing, but the rise on 10-year bond yield should be capped," said Alok Singh, group head of treasury at CSB Bank.
 

US bond yields rose, after strong data, including an unexpected drop in jobless claims, whichled traders to cut bets that the Federal Reserve will make another 50-basis point cut at its November meeting.
 

The Fed had slashed rates by 50 basis points last week, and had guided for another 50 bps of cuts in 2024. But interest rate futures market had assigned a higher probability of another 50 bps. The odds have now eased to 49 per cent, from 60 per cent.

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