Updated March 5th, 2024 at 09:14 IST

Government bond yields may stabilise ahead of state debt sale

The benchmark 10-year yield is projected to remain within a narrow range of 7.04% to 7.08%, maintaining its previous close of 7.0601%.

Reported by: Business Desk
Government bonds | Image:Republic
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Government bond yields: Traders anticipate little movement in government bond yields as markets await a fresh supply of debt from various states, while US yields show signs of rebounding from recent declines.

The benchmark 10-year yield is projected to remain within a narrow range of 7.04 per cent to 7.08 per cent, maintaining its previous close of 7.0601 per cent, according to a trader from a private bank. 

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The lack of catalysts has kept the benchmark yield hovering around the 7.05 per cent level in recent days.

Eleven states are set to raise Rs 27,981 crore ($3.37 billion) through bond sales later in the day, marking a three-week low and falling short of the calendar by over Rs 10,000 crore.

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This shortfall in borrowing since February has resulted in a contraction of spreads with corresponding central government securities.

In contrast, US yields experienced an uptick on Monday, with the 10-year yield surpassing the critical 4.20 per cent mark ahead of a volatile week. 

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Events such as Federal Reserve Chair Jerome Powell's testimony and the release of US February jobs data are expected to increase market volatility.

Traders are closely monitoring signs of economic strength and inflation trends to gauge the timing of potential interest rate cuts by the US central bank. 

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While the likelihood of a rate cut in May has decreased to 21 per cent, down from 26 per cent the previous day and 73 per cent the previous month, according to the CME FedWatch tool.

On the domestic front, traders are awaiting key inflation data, with expectations that the Reserve Bank of India may postpone interest rate cuts until the third quarter of the next financial year, as it seeks to sustainably meet its 4 per cent inflation target.

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(With Reuters Inputs)

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Published March 5th, 2024 at 08:24 IST