Government 10-year bond yield holds 6.90% level before debt sale

Indian government bond yields dipped in early session on Friday, tracking U.S. peers, but the decline in domestic benchmark yield was limited at around 6.90 per cent ahead of the upcoming weekly debt sale.

The benchmark 10-year yield was at 6.9069 per cent as of 10:00 am IST, compared with its previous close of 6.9166 per cent. Earlier in the day, it fell to 6.9016 per cent, the lowest since April 5, 2022.

"Offers are getting matched with bids, and it seems bulls will have to wait for debt auction result for the break of 6.90 per cent on the benchmark," a trader with a primary dealership said.

New Delhi aims to raise Rs 22,000 crore ($2.63 billion) on Friday through the sale of bonds, which includes 10-year green bonds and a 30-year paper. Earlier this financial year, a green bond sale had to be cancelled as investors had bid at higher yields.

This would also be the first auction of a 30-year paper since the central bank reintroduced investment curbs on the 14- and 30-year papers.

The central bank's move has not gone down well with foreign investors, who call it a policy flip-flop that may force them to redraw investment strategies.

US yields plunged on Thursday, with the 10-year yields hitting a fresh six-month low and sliding below 4 per cent, and declined further in Asian hours.

Yields fell amid building worries over the US economy. A surprise slump in manufacturing data ignited concerns the Federal Reserve may be behind the curve with rate cuts, which may make their aim of soft landing difficult.

Earlier this week, Fed Chair Jerome Powell said price pressures were broadly easing and that a "rate cut could be on the table" at the September meeting.

Investors have now priced in about 85 basis points of rate cuts in 2024, with a 32 per cent probability of the first cut in September being a 50 bps move, as per the CME FedWatch tool.