INDIA BONDS-India bond yields seen tad higher tracking U.S. peers

By Dharamraj Dhutia

MUMBAI, March 29 (Reuters) – Indian government bond yields are likely to rise in the early session on Wednesday, tracking an uptick in U.S. peers, while traders await the April-September borrowing calendar.

The 10-year benchmark 7.26% 2032 bond yield IN072632G=CC is expected to be in a 7.30%-7.36% range after closing at 7.3240% on Tuesday, a trader with a private bank said. Indian markets are closed on Thursday for a local holiday.

Some uptick is likely but any major move before the financial year-end can be safely ruled out, the trader added.

U.S. yields rose further overnight, as investors become more optimistic that recent stress in the banking system will be contained. The two-year yield was trading above 4.10%, while the 10-year yield was trading close to 3.60%.

Indian bond yields ended higher on Tuesday, as states raised a record 412.14 billion rupees ($5.02 billion) amid strong demand from insurance companies.

States have raised 7.58 trillion rupees through the sale of bonds in the current financial year, higher than last year’s 7.02 trillion rupees.

Most traders now await the central government’s borrowing calendar for April-September, likely to be published by the end of this week. The borrowing is expected to be between 55% and 58% of its gross annual target of 15.43 trillion rupees.

The borrowing calendar would be followed by the Reserve Bank of India’s monetary policy decision on April 6.

The RBI will raise the interest rate by 25 basis points and then pause for the rest of the year, according to a Reuters poll of economists, who said the central bank would still maintain its tightening stance.

A strong majority of economists, 49 of 62, said the RBI would lift its repo rate to a seven-year high of 6.75%. The central bank raised the repo rate by 250 bps to 6.50% in the current financial year.

KEY INDICATORS:

** Brent crude futures LCOc1 contract was up 0.5% at $79.10 per barrel after rising 0.7% in previous session

** 10-year U.S. Treasury yield US10YT=RR was at 3.5091% and two-year note US2YT=RR was at 3.9180%

** RBI to auction Treasury Bills worth 390 billion rupees

($1 = 82.1770 Indian rupees)

(Reporting by Dharamraj Dhutia Editing by Eileen Soreng)

((Dharamraj.dhutia@tr.com))

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