Bond yields little changed, weekly debt sale eyed

Government bond yields ended largely steady on Thursday as traders await the weekly debt auction to gauge investor demand and look out for fresh cues.

The 10-year benchmark bond yield ended at 7.2561 per cent, after closing the previous session at 7.2444 per cent.

"Global factors are steady and with tight banking liquidity, there are no expectations of OMO (open market operation) sale announcement from the central bank. So, debt auction will provide some directional cues," a foreign bank trader said.

New Delhi aims to raise Rs 30,000 crore through the sale of bonds, which includes Rs 12,000 crore of 40-year bonds.

US Treasury yields pared early losses on Wednesday after strong initial jobless claims data unsettled a market that expects the Federal Reserve to start cutting interest rates around June next year.

Global rates seem to be at or near peak in the current interest rate cycle. Global bond yields have eased and Indian bonds too have participated in this global move, said Vikrant Mehta, head of fixed income at ITI Mutual Fund.

"We expect a secular decline in yields over the medium term and expect the 10-year government security to trade sub 7 per cent by the first quarter of the next fiscal year," he added.

Meanwhile, oil prices fell on Thursday after OPEC+ postponed a ministerial meeting. Brent crude was down 0.9 per cent at $81.19 per barrel in Asian hours.

Easing oil prices are good for countries like India, which are major importers of the commodity.

Domestic bond traders are also awaiting a decision on the inclusion of Indian bonds in the Bloomberg Global Aggregate after JPMorgan added the notes to its emerging market index in September

Indian government bonds could see foreign inflows of close to $25 billion if they are included in key Bloomberg bond indexes, said Sameer Karyatt, executive director - treasury and markets at DBS Bank India.