Mumbai: Indian federal bond yields eased on Thursday, 24 September, as lower oil prices calmed inflation concerns, but traders were reluctant to build long positions ahead of a large auction.
The government will sell $2.2 billion of government bonds on Friday and dealers are waiting for the indicative auction calendar for the October-March period, expected to be announced in the next few days.
Oil softened to below $106 a barrel on concerns over the US economy and sliding fuel demand.
At 10:23am, the 10-year benchmark bond yield was at 8.59%, below Wednesday’s 8.63% which was its highest close since 1 September.
“The focus is now on the calendar and bond yields could spike if supplies are higher,” a dealer with a private sector bank said.
Analysts say the government’s finances are expected to worsen in coming months due to an increase in salaries of federal employees and higher subsidies toward fuel and fertilizers.
The government will sell Rs6,000 crore ($1.3 billion) of 7.94% 2021 bonds and Rs4,000 crore of 8.28% 2032 bonds on Friday.
Dealers would also await weekly inflation data due around 6:00pm.
The wholesale price index may have risen 12.23% in the 12 months to 13 September, according to a Reuters poll of analysts. The inflation rate in the preceding week was 12.14%.