MUMBAI, Dec 30 (Reuters) – Indian government bond yields were little changed on Monday, even as U.S. Treasury yields remained elevated, with market participants seeking a firm direction towards the end of the year.
The 10-year yield was at 6.7873% as of 10:00 a.m. IST, compared with its previous close of 6.7852%.
“With benchmark bond yield around par levels, there is no trading interest from any segment, and people are just waiting to enter the new quarter and new year,” trader with a private bank said, referring to the bond’s coupon of 6.79%.
The daily average trading volume has dropped to around 381 billion rupees ($4.46 billion) over the last two weeks from 719 billion rupees in the prior fortnight, data from the Clearing Corp of India showed.
Traders were also monitoring the movement in the rupee, which plummeted to record lows over the last few days, and could trigger further foreign outflows in the bond market.
Foreign investors have net sold bonds linked to JPMorgan’s emerging market debt index worth 27 billion rupees over the last three weeks, after net purchase of 94 billion rupees in the first week of the month.
The widening banking system liquidity deficit has also made investors cautious of avoiding portfolio losses at the end of the fiscal year’s third quarter.
Globally, the 10-year U.S. yields moved higher on Friday and was at 4.60% in Asia hours, as investors pare debt holdings ahead of the year-end and await the new year uncertain about interest rate cuts.
The underlying sentiment in the world’s largest economy has turned cautious since last week when the Federal Reserve lowered its rate cut forecast for 2025 to 50 basis points from 100 bps earlier.
The odds of a pause in January are at 89%, according to CME’s FedWatch Tool. ($1 = 85.4750 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Varun H K)
