Benchmark sovereign paper saw yields ease by midday, bolstered by Brent crude retreating to $114 a barrel on easing supply concerns and the 10-year U.S. yield sliding to 4.99%. Even with these supportive external factors, market participants exercised caution ahead of an imminent 330 billion rupee sovereign debt sale scheduled for Friday. Simultaneously, the Indian rupee depreciated to 95.36 per dollar, compounding persistent domestic worries over inflation and future borrowing costs.
Key points
New Delhi's upcoming 330 billion rupee debt auction tempered buying interest despite supp…: New Delhi's upcoming 330 billion rupee debt auction tempered buying interest despite supportive international cues.
The Federal Reserve kept interest rates unchanged while pointing to elevated inflation, k…: The Federal Reserve kept interest rates unchanged while pointing to elevated inflation, keeping December rate hike expectations active.
Indian overnight indexed swap rates settled mixed as local currency weakness countered th…: Indian overnight indexed swap rates settled mixed as local currency weakness countered the impact of retreating U.S. yields.
Sources checked by our analysis pipeline: 1
The benchmark 6.94% 2036 bond yield was down 3 basis points at 7.4091% by noon. Bond yields move inversely to prices.
The yield slipped below the key 7.40% technical level in early trade before retracing, as investors stayed cautious before New Delhi's 330 billion rupee($3.47 billion) bond sale on Friday. The rupee weakened 0.15% to 95.36 per dollar, reviving inflation and rate-hike concerns.
Indian government bonds increased on Thursday due to support from a rally in Treasuries and lower oil prices. However, the upcoming large bond sale and a weak rupee limited the extent of the gains observed. The benchmark 6.94% 2036 bond yield fell slightly below the significant 7.40% level during early trading hours. Meanwhile, the Reserve Bank of India previously raised the repo rate amid ongoing inflation concerns.
Relief came from a sharp decline in the 10-year US Treasury yield, a key gauge for global borrowing costs, which fell 5 basis points to 4.99% in Asian trade. Brent crude slipped 1% to $114 a barrel, as peace-talk hopes eased supply-disruption concerns.
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