India bond yields could inch up as Treasury yields rise, supply hurts

MUMBAI, March 10 (Reuters) – Indian government bond yields are expected to inch higher at the start of the week, tracking an uptick in U.S. Treasury yields as well as elevated supply of debt from states.

The benchmark 10-year yield is likely to move between 6.68% and 6.72%, a trader with a private bank said, compared with its previous close of 6.6881%.

“We could see some pressure on bonds, especially the benchmark yield, which will react to multiple factors which are not so favourable,” the trader said.

U.S. yields rose on Friday after Federal Reserve Chair Jerome Powell indicated the central bank could be patient in determining when to cut interest rates.

Powell said the Fed does not need to be in a hurry to cut rates and it remains to be seen whether U.S. President Donald Trump administration’s tariff plans will prove to be inflationary, while also listing other factors that could cause price pressures to become more persistent.

Meanwhile, data showed U.S. nonfarm payrolls increased by 151,000 jobs last month, just below the 160,000 estimate of economists polled by Reuters, after rising by a downwardly revised 125,000 in January. The jobless rate ticked up to 4.1% from 4.0% in January.

Interest rate futures are pricing around 75 basis points of rate cuts from the Fed in 2025. It reduced rates by 100 bps in 2024.

Back home, bonds could also witness headwinds as states will sell a larger-than-scheduled quantum of debt this week, their second such move in as many weeks.

They plan to raise 495.22 billion rupees ($5.68 billion) through sale of bonds on Tuesday, nearly 110 billion rupees higher than the pre-announced calendar. Last week, they raised over 100 billion rupees more than scheduled.

India’s central bank is set to buy bonds worth 500 billion rupees each on March 12 and March 18, and has not included the benchmark at this week’s purchase, which is also weighing on sentiment.

KEY INDICATORS: ** Brent crude futures were down 0.5% at $70 per barrel, after rising 1.3% in the previous session ** Ten-year U.S. Treasury yield at 4.2800%; two-year yield at 3.9811% ** RBI to conduct 1-day variable rate repo auction for 750 billion rupees ($1 = 87.1430 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)