MUMBAI, Dec 2 (Reuters) – Yields on Indian government bonds are expected to open lower on Friday, trailing further declines in U.S. peers, although fresh debt supply through weekly auctions could limit their moves.
The benchmark 10-year yield is expected to move in a range of 7.17% to 7.23%, a private bank trader said. The yield ended at 7.2095% on Thursday, its lowest level since Sept. 15. The yield also fell the most, in terms of basis points, since Oct. 4.
As the US 10-year rate is closer to 3.50%, there could be more purchases of local bonds. The market can, however, wait for auction cuts to gauge appetite at these levels, the trader added.
New Delhi plans to raise 300 billion rupees ($3.70 billion) through bond sales, including liquid 14-year bonds.
US Treasury prices rose further, with the yield on 10-year bonds falling to 3.5050%, its lowest level since September 21, as October’s moderation in inflation pushed yields further lower on Thursday.
Yields had fallen in the previous session when Federal Reserve Chairman Jerome Powell said the US central bank could slow its pace of interest rate hikes as soon as its December policy meeting is two weeks away.
As the Fed is set to slow down its pace of rate hikes, market participants also expect the Reserve Bank of India (RBI) to reflect the move.
The RBI’s monetary policy decision is due on Wednesday, and it is set to raise interest rates by 35 basis points to 6.25%, according to economists polled by Reuters who expect further modest increase early next year to curb lingering inflationary pressures.
A strong two-thirds majority said it was still too early for the central bank to divert attention from inflation, which slowed to 6.77% at the last moment but remained above the upper end of the 2% to 6% RBI year-round tolerance range. . KEY INDICATORS: **Brent futures up 0.3% to $87.15 a barrel, after rising 1.7% in the previous session **The 10-year US Treasury yield was at 3.5339% and the two-year note at 4.2646% **India to sell Federal Government bonds worth Rs 300 billion **RBI to set underwriting fee for Federal Government bonds worth 300 billion rupees ** RBI will hold a 14-day floating rate reverse repo auction for 1.50 trillion rupees ($1 = 81.1600 Indian rupees) (Report by Dharamraj Dhutia; Editing by Rashmi Aish)