Government bonds hold firm ahead of debt auction, RBI liquidity operation
According to a Reuters report, the benchmark 10-year bond yield stood at 6.4826% at 10:00 a.m., which is marginally higher than Wednesday's close of 6.4811%. The government aims to raise ₹ 28,000 crore ($3.20 billion) through the sale of a 5-year bond and a new 30-year security.
Traders stated that the auction will be closely monitored as a test of appetite for long-term notes.
'Pre-policy, we had seen strong participation from banks in the longer end. If that repeats today, government securities should sustain current levels,' a fund manager at an asset management company told Reuters. 'Today's auction will be a deciding factor for volatility or recovery of bonds.'
The market activity is also expected to remain subdued ahead of the long weekend, with the local debt market closed on August 15, 2025, for the occasion of Independence Day. Any intraday dips could prompt opportunistic buying, traders added.
Furthermore, later in the day, the Reserve Bank of India (RBI) will conduct an eight-day variable rate reverse repo auction. This will be done with an objective to absorb ₹ 2 lakh crore from the banking system. Liquidity surplus remains elevated at ₹ 2.9 lakh crore or over 1% of deposits as of August 14, 2025.
Overnight index swap (OIS) rates continued to witness, receiving interest, with traders factoring in at least one rate cut in 2025. Hence, softening US Treasury yields and growing bets on a September Federal Reserve cut are also keeping the sentiment balanced for longer-duration rates.
The one-year OIS rates fell by 1 basis point to 5.4950%, whereas the two-year rate held steady at 5.44%. The actively traded five-year OIS rate slipped over 1 basis point to 5.6325%.
(With inputs from Reuters)
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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