India bonds steady ahead of New Delhi's debt sale
The benchmark 10-year bond yield was at 6.4826% as of 10:00 a.m. IST, compared with Wednesday's close of 6.4811%.
New Delhi is set to raise 280 billion rupees ($3.20 billion) through a debt sale, which includes a 5-year bond and a new 30-year security.
The auction is being seen as a key test of demand for longer-term notes, traders said.
'Pre-policy, we had seen a lot of participation by banks in the longer end. If that repeats today, then we will see government securities sustaining levels,' a fund manager at an AMC said.
'Today's auction will be a deciding factor for volatility or recovery of bonds.'
Traders are also likely to keep positions light ahead of a long weekend. The local debt market shut on Friday for Independence Day.
Any dips will trigger opportunistic buying during the day, traders said.
The Reserve Bank of India will hold an eight-day variable rate reverse repo auction to withdraw two trillion rupees from the banking system later in the day.
The banking system's liquidity surplus continues to remain above 1% of deposits at 2.9 trillion rupees as on Wednesday.
Rates
India's overnight index swap (OIS) rates continued to see receiving, with traders expecting at least one rate cut in 2025.
Meanwhile, falling U.S. Treasury yields and rising wagers for a September rate cut by the Federal Reserve are aiding the sentiment for longer-duration rates.
The one-year OIS rate INR1YMIBROIS=CC fell 1 basis point to 5.4950% and the two-year OIS rate was steady at 5.44%. The liquid five-year OIS rate dipped more than 1 bp to 5.6325%.
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