Indian bonds consolidate as 10-year bond yield tops 6.75%

MUMBAI, March 5 (Reuters) – Indian government bond yields consolidated on Wednesday after the benchmark bond yield rose above the 6.75% mark to its highest in over six weeks as broader sentiment remained cautious amid heavy debt supply.

The benchmark 10-year yield was at 6.7401% as of 10:00 a.m. IST, compared with its previous close of 6.7447%. Earlier in the day, it had hit 6.7530%, its highest since January 20.

“There is literally no interest from traders to go either side, and hence we may see the benchmark yield consolidating around the key 6.75% level until any major trigger is witnessed,” a trader with a primary dealership said.

Trading interest in longer-duration government bonds has diminished, with Indian states set to sell a large quantum of debt this month ahead of the financial year-end.

States raised 505 billion rupees ($5.80 billion) through a sale of bonds on Tuesday, with cutoff yields higher than anticipated, indicating weak demand.

Despite the central government’s borrowing programme for the financial year-end concluding, states are expected to raise around 1.35 trillion rupees in the last three weeks of March, with traders anticipating actual borrowing to be higher than the announced calendar.

A majority of the supply from states is expected to be dominated by longer tenure bonds.

Demand for longer-duration notes has eased amid uncertainty around bond purchases by the Reserve Bank of India (RBI) in March, after the central bank infused around 870 billion rupees into the banking system through a three-year dollar/rupee swap.

The RBI will auction Treasury bills worth 330 billion rupees later in the day.

Meanwhile, longer-dated U.S. Treasury yields rose on Tuesday and extended their rise during Asian trade.

The yields had eased on Tuesday on concerns that U.S. President Donald Trump’s 25% tariffs on imports from Mexico and Canada, as well as the doubling of duties on Chinese imports, could rattle global trade. ($1 = 87.1075 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Sonia Cheema)