 "Steady benchmark bond yields eye Budget, US Fed cues for direction")
Indian government bond yields started the week flattish, while they awaited the U.S. Federal Reserve policy decision and the domestic budget announcement for near-term directional cues.
India's benchmark 10-year yield ended at 7.1735%, on Monday, following its previous close at 7.1760%.
India's finance minister is due to announce budget for the next financial year on Thursday and the government may keep its gross market borrowing for 2024/25 close to the current fiscal year's level, two government sources told Reuters.
The government may target gross borrowing of the next fiscal year between 15 trillion rupees ($180.5 billion) and 15.50 trillion rupees, against a planned 15.43 trillion rupees this year.
A Reuters poll also predicted the fiscal deficit as a percentage of GDP to decline to 5.30% in 2024/25 from 5.90% this fiscal year, with projected gross borrowing of 15.60 trillion rupees.
The government's borrowings for the next financial year from the bond market might be lower than this fiscal and "we expect a gross market borrowing of around 14.8 trillion rupees and net market borrowing of around 11.2 trillion in FY25", said Pankaj Pathak, fixed income fund manager at Quantum AMC.
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He expects the government to continue with the fiscal consolidation plan to bring down the fiscal deficit to 4.5% of GDP by FY26 and anticipates the fiscal deficit target should be around 5.3% of GDP for FY25.
Market sentiment remained cautious as U.S. yields remained elevated, with the 10-year yield around 4.15%, while investors awaited the Fed's Jan. 30-31 meeting after strong economic data prompted a reduction in bets of the timing and pace of rate cuts in 2024.
The odds for a rate action in March stand around 48%, down from 87% last month, according to the CME's FedWatch Tool.
Oil prices also rose, with the benchmark Brent crude contract moving towards the $85 per barrel mark, on escalating tensions in the Middle East.