The yield on the benchmark 10-year bond ended at 7.3077%, after closing at 7.3194% on Monday.
“Government debt saw decent demand today, although the quantum is higher. But overall, bond yields are expected to remain in a tight range for the rest of the week,” said Nandan Pradhan, chief executive. Assistant, Treasury, Cosmos Bank.
Indian states raised 231.47 billion rupees ($2.79 billion) through bond sales – the highest amount for an October-December auction.
The Reserve Bank of India (RBI) has set the limit yield on 10-year government bonds at 7.60%-7.63%, which is slightly below market expectations. The market is now in vacation mode, and very few transactions are taking place. Traders are largely refraining from taking positions as it is the end of the quarter and there is a lack of volume and new triggers, a state bank trader said.
Trading volume remained weak, with bonds worth around 130 billion rupees sold as of 3:30 p.m. IST, down from 114.97 billion rupees on Monday, the lowest level in more than a year. Looking ahead, market participants expect the yield on the benchmark 10-year bond to move in a tight range of 7.30%-7.33% through Friday.
Foreign banks have also been on the selling side, as they have sold bonds worth almost Rs 42 billion in the last eight trading sessions on a net basis, after remaining a significant buyer over the past the first half of December.
Meanwhile, the RBI may continue bond sales in the secondary market to drain cash after selling debt worth more than Rs 100 billion over three weeks to December 16, traders say. and analysts.
($1 = 82.8225 Indian rupees)