India’s benchmark 10-year yield was at 7.0265% as of 10:30 a.m. IST, following its previous close at 7.0583%. Thursday’s close was the lowest since July 18 and the yield logged its biggest single-session fall since May 3.
“This is an extension of the recent bull run and only the date has changed,” a trader with a state-run bank said.
“We may take some breather around 7.03%-7.04%, and see at what levels fresh supply gets absorbed.”
New Delhi is set to raise 390 billion rupees ($4.71 billion) via a weekly auction of debt later in the day.
Bond yields collapsed after the government set lower-than-expected fiscal deficit and gross borrowing targets for the next financial year. The government aims to reduce its fiscal deficit to 5.1% of gross domestic product (GDP), from a downwardly revised 5.8% for this financial year. It will gross borrow 14.13 trillion rupees, against expectations of 15.60 trillion rupees. The gross borrowing was unexpectedly lowered as the government expects to repay a chunk of maturing debt through the Goods and Services Tax compensation fund, budget documents showed.
B. Prasanna, the head of treasury for ICICI Bank expects the benchmark yield to hit 6.75% in the next few months, as the unexpected cut in borrowing has turned demand-supply dynamics favourable.
U.S. yields fell further, with the 10-year yield now hovering around 3.90%, as renewed concerns about the regional banking sector and higher-than-expected weekly jobless claims pushed investors toward safe-haven assets.
Focus is now on the January U.S. non-farm payroll data, due after Indian market hours. It will be a crucial guide for the Federal Reserve to time the start of its rate-easing cycle. ($1 = 82.8610 Indian rupees)
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