India’s bond yields ease, traders adjust position ahead of debt auction

MUMBAI, Nov 24 (Reuters) – India’s bond yields ended lower on Thursday after minutes of the US Federal Reserve’s November meeting signaled a slower pace of rate hikes moving forward.

During the day, yields moved in a narrow range as traders adjusted their positions ahead of the weekly debt auction on Friday.

The benchmark 10-year government bond yield ended at 7.2548% versus its close of 7.2910% on Wednesday. The yields opened at an intraday low of 7.2504%.

The Fed minutes showed that a “substantial majority” of policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes. The US central bank raised its policy rates by 75 basis points (bps) for the fourth straight time in November.

The market had largely factored in the slower pace of hikes, but the broader sentiment was supported by positive factors such as the decline in US Treasury yields and oil prices, said a trader with a primary dealership.

Some market participants also placed short bets ahead of the weekly auction, which weighed on prices and yields recovered during the session, the trader said.

“The overall view of the market is broadly positive. I see momentum to go till the 7.20%-level and then we may see some reversal. Any level that is above 7.35% is, in my view, a good level to buy,” said Ritesh Bhusari, deputy general manager for treasury at South Indian Bank.

He expects yields to remain in the 7.20%-7.40% range till the Reserve Bank of India’s policy outcome on Dec. 7.

New Delhi aims to raise 280 billion Indian rupees (USD 3.43 billion) through the sale of bonds on Friday, which includes the benchmark 10-year paper.

During the day, India’s 5-year overnight index swap fell to 6.28%, its lowest level since mid-September, tracking overnight fall in oil prices and Treasury yields, dealers said.

(USD 1 = 81.6750 Indian rupees)

(Reporting by Bhakti Tambe; Editing by Janane Venkatraman)