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Indian government bond yields are expected to trade little, changed at the start of the week, amid consolidation around the current levels, while traders await fresh triggers for a further downmove.
The benchmark 10-year yield is likely to move in a 6.98 per cent-7.02 per cent range on Monday, following its previous close of 6.9988 per cent, a trader with a state-run bank said.
"With the benchmark already around 7 per cent, we may not see an easy move towards 6.95 per cent, and there could be some sort of tug of war between the buyers and sellers around these levels, and even U.S. yields have firmed up slightly," the trader said.
Bond yields fell for the fifth consecutive week, after the Reserve Bank of India's board, approved the transfer of a record ₹2.11 trillion ($25.40 billion), as surplus to the government for the fiscal, 2024.
The government's fiscal position, is expected to strengthen, after a better-than-estimated dividend transfer, and could further reduce some supply pressure, aiding the demand-supply dynamics, traders said.
New Delhi, has already cut the supply of Treasury bills by ₹600 billion till June, and has conducted buyback of securities worth around ₹179 billion in May.
According to multiple sources, the government, is open to buying back more bonds and cutting T-bill supply for short-term cash management, while decision on lowering fiscal deficit, and market borrowings, will be taken after formation of a new government.
U.S. yields ended higher in the previous week, with the 10-year yield nearing the 4.50 per cent mark, while the two-year yield nearing the 5 per cent mark, as data and commentary from the Federal Reserve have once again pared rate cuts bets for 2024.
Futures markets are now pricing only around 34 basis points of rate cuts this year, as compared to over 50 bps earlier in the month, according to CME FedWatch Tool.
Key indicators
Brent crude futures were 0.1 per cent higher at $82.20 per barrel, after rising 0.9 per cent in the previous session Ten-year U.S. Treasury yield at 4.4730 per cent, two-year yield at 4.9530 per cent India to switch government bonds worth ₹220 billion($1 = ₹83.0710)
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