Govt bond yields seen steady with focus on global index inclusion

Indian government bond yields are expected to be largely unchanged in early trade on Wednesday, as investors continue to remain focused on foreign flows ahead of the inclusion of Indian debt in a global index on Friday.
 

The benchmark 10-year yield is likely to move in a 6.95 per cent-6.99 per cent range, following its previous close of 6.9858 per cent, a trader with a primary dealership said.
 

"We have not yet seen any chunky flows in the system and once we see them hitting, we could see bond yields decline as for the time being there is no other trigger for bonds," the trader said.
 

 

Inflows into bonds under the fully accessible route, which will be included in JPMorgan's widely-tracked emerging market debt index on June 28, have risen to more than $10 billion since the inclusion's announcement in September.
 

This includes more than $1 billion worth of purchases in June, with the focus being on elongating the average duration, as these investors majorly bought maturity papers of 10-year and above.
 

Investors tracking the index are bullish on India and had allocated 3.6 per cent of holdings to the country's bonds as of end-May, Min Dai, head of Asia Macro strategy at Morgan Stanley, said in a note last week.
 

Hong Kong-based portfolio manager Yifei Ding at global asset manager Invesco, for instance, is looking to continue investing in India's five-year to 10-year bonds on bets of capital appreciation and little impact from global volatility.
 

Foreign banks have also stepped up purchases of bonds, especially those of longer maturities through the last few days.
 

Meanwhile, the 10-year US yield was glued to the 4.25 per cent mark, as investors awaited economic and inflation data due this week to assess whether a recent weakening in economic activity will continue and could lead to rate easing from the Federal Reserve.

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