MUMBAI, April 30 (Reuters) – Indian government bond yields rose in early deals on Wednesday, with traders paring positions to book profits before the sale of a new 10-year bond on Friday.
The benchmark 10-year yield was at 6.3573% as of 10:35 a.m. IST, compared with the previous close of 6.3419%.
The Indian bond market will be shut on Thursday due to a local holiday.
“As expected, we are seeing some consolidation in the benchmark at around 6.34%-6.35% levels, and we do not expect any major moves ahead of the holiday, with action shifting to Friday when a new 10-year bond would be sold,” a trader with a primary dealership said.
The Reserve Bank of India will sell a new 10-year bond on Friday, which is likely to attract strong bidding interest, traders said.
Investors have largely been selling bonds to make room for the new 10-year benchmark paper, they said.
The Reserve Bank of India is set to purchase government bonds worth up to 1.25 trillion rupees ($14.7 billion) through four tranches in the next three weeks.
Overall market sentiment has been upbeat since the Reserve Bank of India announced a larger-than-expected bond purchase plan for May.
The current demand-supply dynamics in the domestic bond market favour a downward trend in yields, traders said.
The central bank’s bond purchase plan and upcoming bond redemptions have pushed net debt supply in the April-to-June quarter to nearly nil.
India’s overnight index swap rates were steady even as U.S. Treasury yields dropped on Tuesday, as profit booking in the domestic market offset the receiving bias.
The 5-year swap rate, which is more sensitive to U.S. Treasuries, continued to decline while the shorter tenor swaps held pat.
The one-year OIS rate was flat at 5.67%, the two-year OIS rate was little changed at 5.52%, while the five-year OIS rate declined 2 basis points to 5.63%. ($1 = 85.1250 Indian rupees) (Reporting by Khushi Malhotra; Editing by Mrigank Dhaniwala)
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