India bond yields may inch higher as markets await weekly debt auction

Indian government bond yields are expected to edge higher in early deals on Friday as market participants await fresh supply via a weekly debt auction, as well as key domestic and US data, for directional cues.
 

The benchmark 10-year yield is likely to move between 6.85 per cent and 6.89 per cent till the debt auction, compared with its previous close of 6.8637 per cent, a trader with a primary dealership said.
 

India will sell bonds worth Rs 300 billion ($3.58 billion) on Friday, including Rs 200 billion of the benchmark bond, taking its total outstanding to Rs 1.60 trillion.
 

"Today's focus should remain on the auction cutoffs, especially for the benchmark note, and looking at the last few days, we are anticipating yields to move towards 6.88 per cent by the end of the session," the trader said.
 

India will release its April-June economic growth data after market hours on Friday and a Reuters poll expects gross domestic product (GDP) to have grown an annual 6.9 per cent, down from 7.8 per cent in the preceding quarter, due to lower government spending amid national election.
 

Meanwhile, the United States will release the personal consumption expenditures data, the Federal Reserve's preferred gauge to measure inflation, after Indian market hours.
 

Fed Chair Jerome Powell had last week delivered his strongest signal that interest rates will come down in September.

US yields rose on Thursday after data showed the world's largest economy grew 3.0 per cent year-on-year in April-June, revised up from the 2.8 per cent expansion reported last month.
 

This indicated the economy was on solid enough footing to likely give the Fed room to be less aggressive in cutting rates.

While a rate cut is certain next month, bets are split between a 25-basis-point and a 50-bp cut, with odds of the latter remaining around 33 per cent. For 2024, markets are expecting cuts of just above 100 bps.