India bonds seen extending losses before debt sale as US yields weigh

Business Recorder reported that Indian government bonds could weaken on Thursday, the first day of the third quarter, as high US Treasury yields weigh on rate expectations before the Reserve Bank of India's policy meeting. The government will also sell bonds worth 330 billion rupees later in the day, which adds supply pressure to the market.

The benchmark 6.94% 2036 bond ended Wednesday at 7.1879%, its highest in about two and a half years, after rising 24 basis points in September and roughly 44 basis points over the quarter. Global bonds finished their worst month in years, with the 10-year US Treasury yield posting its biggest monthly rise since 2022 and sitting at 5.30% in Asian trade, the loftiest level since 2007.

Traders see the 2036 yield moving between 7.18% and 7.26%, and one private bank trader warned that a weak auction or further US yield gains could push it toward 7.25%. Brent crude futures fell 5.6% to $97.7 per barrel in Asian trade, which may ease inflation pressure on oil-importing India. Indian debt markets are shut on Friday for a local holiday, and the RBI decision is due on October 7.