India bond traders eye debt auction, GDP data for directional cues

MUMBAI, Feb 28 (Reuters) – Indian government bond yields were largely unchanged in early deals on Friday, as market participants awaited a weekly auction as well as domestic GDP growth data.

The benchmark 10-year yield was at 6.7072% as of 9:45 a.m. IST, compared with its previous close of 6.7086%.

New Delhi aims to raise 320 billion rupees ($3.66 billion)through a sale of bonds, in what would be the last scheduled auction for central government bonds for the financial year that ends on March 31. The auction includes liquid 15-year papers.

“Demand at the last debt auction could provide some clarity on how investors will behave in the near term,” a trader with a private bank said.

The supply comes at a time when investors are wary of adding more longer-duration debt to their portfolios amid uncertainty about whether the central bank will buy more debt in the last month of the year.

Since the middle of January, the central bank has infused more than 3.60 trillion rupees into the banking system through a combination of tools such as primary and secondary market bond purchases, forex swaps and early-April maturity repos.

The Reserve Bank of India will conduct a three-year dollar-rupee buy/sell swap on Friday, leading to a liquidity infusion of around 870 billion rupees. This has led to bets that the central bank may not buy bonds in the near term.

Meanwhile, India’s economic growth is expected to have picked-up in the October to December quarter as rural consumption improved following a good monsoon and government spending gathered pace.

The country’s gross domestic product likely expanded by 6.3% from a year earlier, according to a Reuters poll, still lower than the central bank’s estimate of 6.8%. ($1 = 87.3530 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)