India bonds rangebound ahead of state debt supply, CPI data

Indian government bonds traded in a narrow range in early deals on Friday, as traders awaited the state debt auction and the India and U.S. inflation readings due a day later.

The yield on the benchmark 10-year bond was at 6.4219% as of 10:10 a.m., compared with Friday's close of 6.4121%.

Government bond yields surged in the final market hours on Friday, after New Delhi approved a large compensation for oil marketing companies, triggering concerns of more fiscal measures by the government.


"A lower-than-expected state debt supply likely triggered some short covering at open, but the yields are expected to remain rangebound," a trader at a private bank said.

Indian states are set to raise 84.5 billion rupees ($965.44 million) via bonds later in the day, which is lower than what traders had anticipated.

Any large action would be seen only after inflation print, another trader said, expecting the 10-year bond yield to oscillate between 6.38% and 6.43% during the day.

India's July retail inflation data, which is due at 4:00 p.m. IST on Tuesday, is expected to ease to an eight-year low of 1.76%, down from 2.10% in June, according to a Reuters poll.

The U.S. inflation reading is also due after market hours on Tuesday, which could influence the Federal Reserve's rate-cut trajectory and have a bearing on the domestic bond market. RATES India's overnight index swap rates were little changed in early deals, as traders awaited the U.S. and India inflation data for directional cues.

The one-year OIS rate was at 5.50% and the two-year OIS rate was at 5.4550%. The liquid five-year OIS rate was up slightly at 5.6750%. ($1 = 87.5250 Indian rupees).