India bonds dip before debt sale; state supply eyed

Indian government bonds edged ‍lower early on Friday as traders stayed cautious ahead of fresh debt supply ⁠and a heavy state borrowing calendar. The benchmark 10-year yield was at 6.6002% as of 10:35 a.m. IST, after ending at 6.5818% on Thursday. The yield fell 17 basis ‌points in ‌2025 and has continued to drift lower into the new year. Bond yields rise when prices ‌fall. New Delhi is set to sell 320 billion rupees ($3.56 billion) of the benchmark 10-year bond later in the day. Indian states are expected to announce their January-March borrowing calendar after market hours on Friday, with investors bracing for a record quarterly supply of about 5 trillion rupees. "The state debt auction calendar, followed by the ‌Budget, will be ‍the key triggers shaping risk appetite and the ‍next move in bonds," a private-bank trader said. The Reserve ‌Bank of India has also been injecting liquidity through a run of variable rate repo auctions conducted regularly since Dec. 15 and is set to conduct a five-day variable rate repo auction for 1 trillion rupees ($11.12 billion) later in the day. It will also conduct open market purchases worth 1.5 trillion rupees in January. The banking ‍system cash was in a surplus of 238.65 billion rupees as of Thursday, hovering around neutral levels after staying ‍in deficit ⁠for most of ⁠December. Rising U.S. Treasury yields are also weighing on Indian bonds. The U.S. 10-year bond yield was trading at 4.1631% in Asian hours, up about 5 basis points in the last three sessions. RATES India's overnight index swap rates were little changed in early deals. The one-year OIS rate was at 5.47%, and the two-year OIS rate hovered at 5.5550%. The five-year OIS rate stayed at 5.9250%. ($1 = 89.9620 Indian rupees).