Bond yields seen easing as Indian govt cuts T-bill supply for 6 weeks

Indian government bond yields are expected to decline in early trade on Tuesday, after the government announced a reduction in the supply of shorter-dated Treasury bills for the next six weeks, while it aims to buyback notes maturing in less than six months.
 

The benchmark 10-year yield is likely to move in a 7.01 per cent-7.06 per cent range, following its previous close of 7.0465 per cent.
 

The 7.18 per cent 2033 bond yield is expected to trade between 7.05 per cent and 7.10 per cent, after ending at 7.0925 per cent, a trader with a state-run bank said.
 

 

"The cut in Treasury bills was what the market was wanting, and we should see a better reaction in bonds than the buyback announcements, and this along with a change in securities for repurchase would strengthen the bulls," the trader said.
 

India will reduce the supply of T-bills by Rs 60,000 crore ($7.20 billion) till the end of June, and will sell Rs 4,000 crore of 91-day, 182-day and 364-day T-bills every week, down from Rs 10,000 crore, Rs 5,000 crore and Rs 7,000 crore scheduled earlier.
 

Before the announcement on Friday evening, Reuters reported that traders were expecting a cut in the government's short-term borrowing to reduce the liquidity deficit that has persisted over the last few weeks amid the ongoing general elections.
 

This comes after the government bought back bonds worth only Rs 12,600 crore, against a notified amount of Rs 1 trillion .
 

It aims to buy back securities worth up to Rs 60,000 crore later in the day, but the market anticipates a better response, as the government has come up with a new set of securities to be repurchased.
 

Meanwhile, the 10-year US yield inched higher as Federal Reserve officials pointed to uncertainty over the central bank's ability to cut rates if inflation remains sticky, which also reduced the bets on the quantum of rate cuts in 2024.
 

The futures market is now expecting around 41 basis points of rate cuts in 2024, after fully pricing in two rate cuts on easing inflation, according to CME FedWatch tool.

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