India bonds hang tight before supply as oil stalls

Indian government bonds steadied early on Friday, according to Business Recorder, as oil prices stopped climbing and gave the market some breathing room. The market had been heading for its most difficult week since early April after hawkish central bank minutes and a sharp rise in crude. Early Asian trading had Brent at $93.5 per barrel, with prices steady rather than rising.

Later that day, a debt auction worth 280 billion rupees ($2.93 billion) will test buying appetite, and a 15-year bond accounts for more than half of it. The yield on the 6.94% 2036 benchmark stood at 6.8723% at 10:45 a.m. IST, roughly where Thursday ended and at a two-month high. Over the week the yield has risen about 12 basis points, which would be its biggest weekly gain since April 3.

Gopal Tripathi of Jana Small Finance Bank said the hawkish minutes had tilted sentiment to the downside, though the auction should still attract adequate buying. Talk of an RBI rate increase within the current year is back as price pressures grow, while local support has weakened since the central bank moved up by a month the end of a dollar-attracting scheme that had supported bond demand. Retail inflation in July rose to 4.45%, overshooting the RBI's 4% medium-term goal, and the rate on the US 10-year Treasury stood close to 4.70%, adding to the strain.