INDIA BONDS-India bond yields slightly higher before weekly debt supply

Credit: REUTERS/THOMAS WHITE

By Bhakti Tambe

MUMBAI, Nov 23 (Reuters) - Indian government bond yields edged higher on Thursday, recovering from the previous session's fall, amid low volumes as traders await Friday's weekly debt sale for further cues.

The 10-year benchmark bond yield IN071833G=CC was at 7.2626% as of 10:50 a.m. IST, after ending the previous session at 7.2444%.

"The overall trading volume is low and yield is moving in the 7.25%-7.26% band in choppy trade. Banking system liquidity is also tight, which is resulting in some weakness in bond prices," a trader with a private bank said.

India's banking system liquidity deficit widened further on Wednesday and remained at the highest level in nearly five years. Liquidity deficit is expected to widen further and the gap will narrow next week after bond redemptions and government spending.

The Reserve Bank of India's bond sale is "out of question" at the moment when liquidity is expected to remain tight in the coming days, said Soumyajit Niyogi, director of the core analytical group at India Ratings & Research.

Niyogi sees the bond market tracking oil prices and U.S. bond yields for cues in the coming days, with the next immediate trigger being the RBI's monetary policy due in the first week of December.

U.S. Treasury yields pared early losses on Wednesday after strong initial jobless claims data unsettled a market that expects the Federal Reserve to start cutting interest rates around June next year.

U.S. markets are shut on Thursday for the Thanksgiving holiday.

Meanwhile, oil prices fell on Thursday after OPEC+ postponed a ministerial meeting. Brent crude LCOc1 was down 1.2% at $80.97 per barrel in Asian hours. O/R

Easing oil prices is good for countries like India, which are major importers of the commodity.

Traders are also awaiting a decision on the inclusion of Indian bonds in the Bloomberg Global Aggregate and the Emerging Market Local Currency indexes after JPMorgan added the notes to its emerging market index in September.

New Delhi aims to raise 300 billion rupees through the sale of bonds on Friday.

(Reporting by Bhakti Tambe; Editing by Eileen Soreng)

((Bhakti.Tambe@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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