MUMBAI, Feb 18 (Reuters) – Indian government bonds are expected to trade largely unchanged in early deals on Tuesday, as investors await key market-moving events, including debt purchase by the central bank and Federal Reserve minutes, in the second half of the week.
The benchmark 10-year yield is likely to move between 6.68% and 6.70%, a trader with a private bank said, compared with its previous close of 6.6930%. Indian debt markets will be closed on Wednesday for a local holiday.
“We should see sideway moves today, as immediately there is nothing that could move the markets on either side,” the trader said. “There should be some consolidation in the 6.68%-6.70% zone.”
The Reserve Bank of India will buy bonds worth 400 billion rupees ($4.60 billion) on Thursday, which will be the last leg of its mega liquidity infusion package announced towards the end of January.
For this auction, the central bank has also included the benchmark 6.79% 2034 security. It bought around 50 billion rupees of this paper in its first debt purchase in January, but did not include it in the second auction.
The RBI has so far bought bonds worth 600 billion rupees via auctions and another 388.15 billion rupees through secondary market screen-based purchases in January.
It has injected around 440 billion rupees through a dollar/rupee buy/sell swap and 1.82 trillion rupees through four-day to 56-day repos. The 3.25 trillion-rupee infusion in the banking system has taken place over the last five weeks.
The RBI has also been providing funds through daily overnight repos and adjusting the quantum based on the banking system’s requirement, which has helped to keep the overnight rates closer to the policy rate.
Minutes of the Federal Reserve’s last policy meeting are due on Wednesday, followed by those from the RBI on Friday. The RBI cut policy rate by 25 basis points for the first time in nearly five years on February 7.
Indian states will sell bonds later in the day, while New Delhi will sell debt on Friday. KEY INDICATORS: ** Brent crude futures were down 0.1% at $75.15 per barrel, after gaining 0.6% in the previous session ** Ten-year U.S. Treasury yield at 4.5074%; two-year yield at 4.2694% ** Twelve Indian states to raise 298 billion rupees via sale of bonds ** RBI to conduct 1-day variable rate repo auction for 1 trillion rupees ($1 = 86.9180 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Subhranshu Sahu)
