By Dharamraj Dhutia
MUMBAI, Jan 17 (Reuters) – Indian government bond yields may remain largely unchanged in early session on Tuesday as traders await supply through sale of debt from states.
The benchmark 10-year yield IN072632G=CC could move in a range of 7.31%-7.35%, a trader with a private bank said. The yield ended higher at 7.3283% on Monday, the second consecutive session of rise.
Bond yields have corrected again after last week’s fall, and with a very small quantum of the state debt, it should not make any material difference to the overall supply-demand dynamics, the trader said.
Four Indian states aim to raise 67 billion rupees ($820.27 million) through the sale of bonds against the scheduled 220 billion rupees.
Indian states may not borrow as much as the record 3.41 trillion rupees in the January-March quarter, which will help keep the spread between state and central government bond yields in check, analysts had said after the release of state debt calendar for this quarter.
IDFC First Bank expects states to gross borrow 8.50 trillion rupees in the next financial year as fiscal deficit is expected to be higher and states will not get support from Goods and Service Tax compensation cess arrear payments.
Traders will also keep an eye on the movement in oil prices, after the recent spike in the benchmark Brent crude contract pushing it above $85 per barrel mark on bets of improvement in fuel demand from China.
India is one of the largest importers of the commodity, and its price has a direct impact on local retail inflation, which eased for the second month in December, but remains close to the upper end of the Reserve Bank of India’s 2% – 6% target band.
A big trigger would be the federal budget announcement due on Feb. 1, when the borrowing programme for the next financial year would take centrestage.
KEY INDICATORS:
** Brent crude futures LCOc1 down 0.1% at $84.40 per barrel, after easing 1% in previous session
** 10-year U.S. Treasury yield US10YT=RR was at 3.5366% and the two-year note US2YT=RR at 4.2448%
** Four Indian states to raise 67 billion rupees through sale of bonds
($1 = 81.6800 Indian rupees)
(Reporting by Dharamraj Dhutia Editing by Sohini Goswami)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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