Fresh debt supply to provide directional cue for India bonds
MUMBAI: Indian government bonds could see a stable opening on Friday, as market participants await fresh debt supply through the weekly auction, even as elevated oil prices continue to act as a drag, especially for the longer-duration notes. The yield on the benchmark 6.94% 2036 bond is expected to trade between 6.94% and 6.99%, a trader at a private bank said, after closing at 6.9646% in the…
The Indian government bonds are poised for a stable opening on Friday as investors anticipate fresh debt supply through the weekly auction, despite high oil prices impacting longer-duration notes. The benchmark 6.94% 2036 bond is expected to trade between 6.94% and 6.99%, up from its previous closing of 6.9646%. New Delhi plans to issue bonds worth 320 billion rupees, comprising 210 billion rupees in a new 5-year paper later in the day.
Demand for shorter-duration debt has surged following unprecedented inflows into the central bank's special schemes. India's banking system now holds a record-high liquidity surplus of 9.7 trillion rupees, with these funds likely to be deployed in up to 5-year government bonds, particularly by foreign banks. The depth of investor appetite following the surge in rupee liquidity will be revealed by demand and cutoff for the new paper.
Oil prices remain elevated, with Brent crude contract above $95 per barrel, driven by rising tensions and US-Iran hostilities, which could further strain India's inflation and government finances. The 10-year US yield is above 4.75%, with over 50% of market participants betting on a 25-basis-point Federal Reserve hike later in the month.
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- Fresh debt supply to provide directional cue for India bonds thehindubusinessline.com
