India bond yields flat, favourable demand counters rise in US yields
By Dharamraj Dhutia
MUMBAI, Oct 22 (Reuters) -Indian government bond yields ended largely unchanged after a choppy trading session on Tuesday, as favourable demand-supply dynamics offset the impact of rising U.S. yields and hawkish comments from the local central bank.
The benchmark 10-year bond yield IN071034G=CC ended at 6.8220%, compared with its previous close of 6.8293%.
Bond prices remained volatile, as increased activity continued to push up trading volumes.
"I expect this trend (of higher volumes) to continue in the second half (of the fiscal year)," said Aditya Vyas, chief economist of fixed income and macroeconomic research at STCI Primary Dealer.
Through bond sales Indian states raised 81 billion rupees ($963.48 million), which is sharply lower than the 296 billion rupees scheduled, as per the borrowing calendar.
Media reports that the central government may reduce borrowing via debt sale also aided overall investor appetite.
Bond yields jumped earlier in the session. The benchmark bond yield hit a two-week high of 6.85% as U.S. peers rose on Monday after Minneapolis Fed President Neel Kashkari repeated that he expects "modest" interest rate cuts over the next several quarters.
Kashkari, however, added if there was a sharp weakening in the labour market, then maybe the policymakers ought to bring down the interest rate more quickly.
The 10-year U.S. yield jumped to its highest level in nearly three months and was hovering close to the 4.20% handle.
Interest rate futures indicate a rate cut of 25 basis points by the Fed in November, with a 92% probability, with aggregate rate cuts of 41 bps in 2024. FEDWATCH
The Reserve Bank of India Governor Shaktikanta Das' comment last week that it would be "very premature" and risky to lower interest rates at this stage had previously weighed on sentiment.
Earlier this month, the RBI changed its monetary policy stance to "neutral". The minutes of the central bank's latest meeting are due on Wednesday.
($1 = 84.0700 Indian rupees)
Reporting by Dharamraj Dhutia
Editing by Eileen Soreng
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