Indian bond yields end up climbing as traders take profits ahead of new 10-year bond sell-off

By Dharamraj Lalit Dhutia

MUMBAI, August 18 (Reuters)Yields on Indian government bonds ended higher on Thursday as traders lightened their books after strong gains in the previous session, awaiting further deliveries of a new 10-year bond due to be put on the market. auction Friday.

The benchmark 10-year government bond yield IN065432G=CC finished at 7.2421%. The yield had fallen 11 basis points to 7.1825% on Wednesday, posting its biggest single-day drop in two months.

“After some big buying yesterday, it looks like there was some profit booking today,” said Shrisha Acharya, a fixed income broker at DCB Bank.

The central government will auction bonds worth 330 billion rupees ($4.14 billion) on Friday, including 130 billion rupees of the new 10-year note, which will replace the existing benchmark in weeks coming. The 10-year bond should see strong demand.

Lakshmi Iyer, chief investment officer for debt and commodities at Kotak Mutual Fund, expects the yield on the new 10-year bond to be 5 to 6 basis points lower than the prevailing yield on 10-year bonds. 10 years IN065432G=CCwhich is moving within a range of 10 to 15 basis points from current levels.

Movements in global oil prices will be watched for clues, Iyer said. India imports most of its crude oil needs.

In the recent past, bond yields have softened due to falling crude prices and expectations of a further slowdown in inflation.

“Oil has undoubtedly been a saving grace in the recent past,” Iyer said, adding that “the main trigger is the direction of oil prices – because our sensitivity to this commodity is among the highest.”

Crude Brent LCOc1 futures were trading largely unchanged at $93.65 a barrel on Thursday, after falling to a six-month low on Wednesday.

Retail inflation in India INCPY=ECI fell to 6.71% in July, falling for the third consecutive month and missing the 6.78% predicted by economists in a Reuters poll.

Bond buying on Wednesday was boosted by falling oil prices and comments from Goldman Sachs analysts Danny Suwanapruti and Santanu Sengupta after they said India would likely be included in global bond indices in 2023. , which could result in passive inflows of around $30 billion.

($1 = 79.6775 Indian rupees)

(Reporting by Dharamraj Lalit Dhutia Editing by Neha Arora)

((Dharamrajlalit.dhutia@tr.com))

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