India’s longer-duration government bonds are likely to open steady on Thursday, as investors eye moves in oil prices and Treasuries, while short-term debt could rise after larger-than-anticipated inflows through the central bank’s special schemes.
The yield on the benchmark 6.94 per cent 2036 bond is expected to trade between 6.94 per cent and 6.99 per cent, a trader at a private bank said, after closing at 6.9754 per cent, the highest since June 5, in the previous session.
“There could be some contrasting moves today, with the longer end remaining flat to lower, while the shorter end will see decent demand,” the trader said.
On the global front, oil prices and US Treasury yields remain elevated after hitting fresh highs in recent sessions.
The benchmark Brent crude contract is hovering around $95 per barrel, amid concerns over supply disruption after the US and Iran exchanged strikes, dimming hopes for a quick resolution.
Elevated energy prices pressure large importers like India, as a sustained rise could worsen its inflation trajectory and government finances.
The 10-year US yield remained close to the 4.80 per cent mark, as market wagers on the likelihood of a 25 basis point hike by the Federal Reserve later this month have risen to 68 per cent, up from around 41 per cent a week ago, according to the CME FedWatch tool.
Meanwhile, India attracted a far larger-than-expected $136.38 billion in foreign inflows through special schemes, which will strengthen its ability to defend the rupee against external shocks, and also increase domestic rupee liquidity.
Indian banks mobilised $127.23 billion through non-resident foreign-currency deposits, alongside $3.89 billion in external commercial borrowings and $5.26 billion in overseas foreign-currency borrowings.
Part of these funds are anticipated to be utilised towards deployment in the up to five-year government bonds, especially from foreign banks, that do not have a large retail lending book.
Rates
India’s overnight indexed swap rates could also see mixed moves with the shorter end seeing some receiving.
The one-year rate ended at 6 per cent, while the two-year rate closed at 6.22 per cent. The five-year rate rose 3 basis points to 6.53 per cent.