Indian government bonds could
see a stable opening on Friday, as market participants await
fresh debt supply through the weekly auction, even as elevated
oil prices continue to act as a drag, especially for the
longer-duration notes.
The yield on the benchmark 6.94% 2036 bond is
expected to trade between 6.94% and 6.99%, a trader at a private
bank said, after closing at 6.9646% in the previous session.
New Delhi is expected to sell bonds worth ₹32,000 crore
($3.39 billion), which includes ₹21,000 crore of a new
5-year paper later in the day.
Demand for the shorter-duration debt has improved after way
larger-than-anticipated inflows through the central bank’s
special schemes.
India’s banking system liquidity surplus has jumped to a
record high of 9.7 trillion rupees as of September 3, after
Indian banks raised $127.23 billion through a non-resident
foreign-currency deposit scheme announced by the Reserve Bank of
India.
These funds are anticipated to be utilised towards
deployment in the up to 5-year government bonds, especially from
foreign banks.
“The demand and cutoff for the new paper would provide an
idea about the depth of investor appetite after the spike in
rupee liquidity backed by dollar inflows,” the trader said.
Meanwhile, oil prices remain elevated, with the benchmark
Brent crude contract staying above the crucial $95 per barrel
mark as rising tensions and renewed US-Iran hostilities
heightened concerns over West Asia supply risks.
Elevated energy prices pressure large importers like India,
as a sustained rise could worsen its inflation trajectory and
impact government finances.
The 10-year US yield remained above 4.75% as market wagers
on the likelihood of a 25-basis-point hike by the Federal
Reserve later this month stood at over 50%, according to the CME
FedWatch tool.
Rates
India’s overnight indexed swap rates would search for
direction after contrasting domestic and global cues.
The one-year rate ended at 5.9950%, while
the two-year rate closed at 6.19%. The
five-year rate settled at 6.4875%.
($1 = 94.4850 Indian rupees)