Indian govt bond yields seen steady as traders await fresh triggers

Bond yields have eased over the last few sessions, after the Reserve Bank of India's board last week approved the transfer of a record 2.11 trillion rupees as surplus to the government

Indian government bond yields are expected to trend little changed in early trading on Tuesday, as traders continue to await fresh cues, while they might not react much to yet another announcement of debt buyback from the government.
 

The benchmark 10-year yield is likely to move in a 6.98 per cent-7.02 per cent range, following its previous close of 6.9780 per cent, which was lowest for the 10-year yield since June 6, 2023, a trader with a state-run bank said.
 

"Underlying sentiment is bullish, but with benchmark yield already below 7 per cent, there may not be much room for bulls to go really big, as 6.95 per cent is seen as an immediate support level," the trader said.
 

Bond yields have eased over the last few sessions, after the Reserve Bank of India's board last week approved the transfer of a record 2.11 trillion rupees ($25.39 billion) as surplus to the government for the financial year that ended in March 2024.
 

Market participant believe the government's fiscal position will strengthen after a better-than-estimated dividend transfer and could result in a further supply cut in coming months.
 

New Delhi has already cut the supply of Treasury bills by 600 billion rupees till end of June, and has conducted buyback of securities worth around 179 billion rupees in May. It aims to buyback bonds worth 400 billion rupees on Thursday.
 

Sources have indicated that any decision on lowering fiscal deficit and market borrowings will be taken after formation of a new government, with general election result due next week.
 

US yields remains flattish, with the 10-year yield nearing the 4.50 per cent mark, with futures markets pricing only around 34 basis points of rate cuts this year, compared to over 50 bps earlier in the month, according to CME FedWatch Tool.
 

Trader will also keep an eye on foreign flows as overseas investors are buying longer-duration government bonds ahead of their inclusion in JPMorgan's emerging market debt index in June.

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