Indian government bond yields are likely to dip in the early session on Friday, as oil prices and U.S. yields move lower, while a fresh supply of debt via the weekly auction could cap any major move.
The 10-year benchmark bond yield is expected to move in a range of 7.21%-7.26%, after ending the previous session at 7.2356%, a trader with a primary dealership said.
“There should be some rally at the open in prices, but since the yield is so close to a strong resistance zone, any move below 7.20%-7.21% can be ruled out for now,” the trader said.
“Also, demand at these levels to absorb fresh debt would be crucial.”
New Delhi will raise Rs 30,000 crore ($3.60 billion) through the sale of bonds later in the day, which includes Rs 13,000 crore of the benchmark paper.
U.S. yields fell again on Thursday, after weekly jobless claims rose more than expected, helping cement expectations the Federal Reserve will not feel any pressure to raise interest rates again to slow inflation.
Softer-than-expected inflation reading in the world’s largest economy has increased bets that rate hikes may be done, with the narrative shifting to rate cuts in the first half of 2024, leading to a sharp fall in Treasury yields.
Meanwhile, oil prices tumbled on Thursday, as investors worried about global oil demand following weak data from the U.S. and Asia.
The benchmark Brent crude contract crashed to its lowest level in four months and was trading comfortably below the critical $80 per barrel mark.
Easing oil prices is good for countries like India, which are major importers of the commodity. India’s retail inflation eased in October to a four-month low, with the annual retail inflation at 4.87%, down from 5.02% the previous month and edging closer to the central bank’s target of 4%.