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Updated December 28th, 2023 at 18:54 IST

Bond yields hold steady ahead of weekly debt sale amid year-end lull

The initial decline in yields following the US Federal Reserve's dovish policy stance earlier in the month has stabilised.

Reported by: Business Desk
Bond yields hold steady as traders await fresh triggers
Bond yields | Image:Republic World
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Government bond yields experienced minimal movement on Thursday as traders braced for the upcoming weekly debt sale on Friday, with overall trading volume remaining subdued as the quarter and year draw to a close.

The 10-year benchmark bond yield concluded at 7.2111 per cent, a marginal uptick from the previous session's closing at 7.2074 per cent. Analysts noted that trading activity has been muted due to year-end factors, with the benchmark yield expected to trade within a narrow range until activity gains momentum in the coming week.

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"Trading activity is low because of the year-end, and that's getting reflected in low volumes. The benchmark yield is likely to be in a narrow range till activity picks up next week," explained Yogesh Kalinge, Vice President at AK Capital Services.

The initial decline in yields following the US Federal Reserve's dovish policy stance earlier in the month has stabilised, and attention has shifted to domestic liquidity conditions and impending inflation data.

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New Delhi is set to raise Rs 33,000 crore on Friday through bond sales, adding to the market dynamics.

In contrast, US yields experienced a decline on Wednesday as investors anticipate a mild economic recession in 2024, potentially prompting a more aggressive rate cut by the central bank. The odds of a rate cut in March stand at approximately 88 per cent, with the probability of a total of over 150 basis points of rate cuts in 2024 rising to 81 per cent.

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However, India's central bank maintained the repo rate at 6.50 per cent earlier this month, maintaining its stance for the fifth consecutive time. The Monetary Policy Committee remains watchful of inflation risks, with a clouded outlook due to volatile and uncertain food prices, as revealed in minutes from the meeting.

Market participants are also eagerly awaiting the borrowing calendar of Indian states for January-March, with expectations of borrowing around Rs 3.5 lakh crore.

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(With Reuters inputs.)

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Published December 28th, 2023 at 18:54 IST

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