Indian government bond yields are expected to trade largely unchanged on Tuesday ahead of fresh supply through the sale of debt from states, while major focus remains on the Reserve Bank of India‘s (RBI) upcoming monetary policy decision. The 10-year benchmark 7.26% 2033 bond yield is expected to be in the 6.98% to 7.03% range, after closing at 6.9958% in the previous session, a trader with a private bank said.
“State debt sales are quantum-heavy over the last couple of weeks, and hence we may see some impact on central government securities, with yield remaining around the 7% mark,” the trader added. Indian states aim to raise 173 billion rupees ($2.10 billion) through the sale of bonds later in the day, and the quantum is higher than the 117.50 billion rupees scheduled.
The RBI’s policy decision is due on Thursday, and according to a Reuters poll of 64 economists, the central bank will leave the key interest rate unchanged at 6.50% for June and for the rest of 2023.The Indian central bank had surprised markets with a status quo on rates in its April policy, after hiking by 250 bps in the previous financial year.
The stance remains a close call with policy rates in neutral territory as real rates have turned positive, IDFC First Bank said in a note. “From a liquidity standpoint, the current stance of withdrawal of accommodation remains appropriate. “Meanwhile, U.S. Treasury yields remain largely unchanged, with the 10-year yield trading around 3.70%, with odds of a pause in rates by the Federal Reserve next week further rising to 77%.