MUMBAI: Yields on Indian government bonds rose on Thursday as traders sought to secure recent gains, heading for the auction of a new 10-year note.
The benchmark 10-year government bond yield was 7.2177% at 0450 GMT. The yield fell 11 basis points to 7.1825% on Wednesday in its biggest single-day decline in two months.
“Bonds were in an overbought zone as there were several positives yesterday, but the focus now remains on the denomination of the new 10-year note,” a public bank trader said.
The central government will auction bonds worth 330 billion rupees ($4.14 billion) on Friday, including 130 billion rupees of the new 10-year note, which will replace the existing benchmark in weeks coming.
The 10-year bond is expected to see strong demand, with a cut-off yield likely 5 to 7 basis points lower than the existing benchmark, analysts said.
Meanwhile, Indian states will borrow 40 billion rupees via bond sale on Thursday.
Buying on Wednesday was supported by a slide in oil and comments from Goldman Sachs analysts Danny Suwanapruti and Santanu Sengupta after they pointed out that India would likely be included in global bond indices in 2023, leading to passive entries. approximately $30 billion.
Brent crude futures were trading largely unchanged at $93.65 a barrel on Thursday, after falling to a six-month low on Wednesday. India imports most of its crude oil needs and falling oil prices could contain inflation.
Retail inflation in India fell to 6.71% in July, falling for the third consecutive month and missing the 6.78% expected by economists in a Reuters poll. ($1 = 79.6700 Indian rupees)
(Reporting by Dharamraj Lalit Dhutia Editing by Dhanya Ann Thoppil)