Bonds prices under pressure ahead of ₹25,000 crore auction of government securities

Government bonds dipped in early trading on Friday, as investors remained cautious ahead of the weekly debt sale that will test demand.

The yield on the benchmark 10-year bond was at 6.396%, as of 12:57 pm, while it closed at 6.3861 per cent on Thursday. Bond yields move inversely to prices.

Government is set to raise ₹25,000 crore (equivalent to $2.86 billion) through the sale of seven-year ( ₹11,000 crore) and 50-year bonds ( ₹14,000 crore) in the debt auction today.

Appetite for debt

RBI’s monetary policy committee on Wednesday decided to hold repo rate Governor’s statement lacked dovish sentiment, which pared rate easing bets.

This led to a decline in investor appetite for debt, and traders said that demand for auction will be important for determining the direction of bond yields.

“When there is a lot of supply, whereas the demand remains low, bond prices will go down in the short term. They are typically bought by large institutional investors such as insurance and pension funds and not by retail investors,” says Sridharan S., a Sebi-registered investment advisor and founder of Wealth Ladder Direct

“The uncertainties appear to have increased for bonds. With core inflation stubbornly high and headline inflation projected at 4.9 per cent after a few months, there seems to be little room for an immediate rally,” said Sandeep Bagla, CEO at Trust Mutual Fund.

Investors are now awaiting next quarter’s GDP data by the end of August to get cues which will further determine RBI’s policy trajectory, Reuters reported.

The recent move by US President Donald Trump to levy 50 percent tariffs on Indian imports could harm growth prospects, with a possible adverse impact on the manufacturing sector and garment makers.

Meanwhile, overnight index swap rates were marginally changed after witnessing some receiving in the previous session. The one-year OIS rate was steady at 5.49 percent, and the two-year OIS rate was slightly up at 5.45 percent.

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