10-year bond yield glued near 6.85% before debt sale, US data

Indian government bond yields were largely flat early on Friday, with the benchmark yield remaining close to a key level as traders eye a weekly debt auction, even as US Treasury yields continued to decline.

New Delhi aims to raise 290 billion rupees ($3.45 billion) through a sale of bonds, which includes 120 billion rupees of the liquid 15-year note.

The benchmark 10-year yield was at 6.8514 per cent as of 10:00 a.m. IST, compared with its previous close of 6.8554 per cent. The yield has been glued around 6.85 per cent since Aug. 5, moving no more than 3 basis points in either direction.

"Auction cutoffs should provide some insights on expectations with which traders are entering the week that would be the deciding one as far as the start of rate cut cycle in the Unites States is concerned," trader with a private bank said.

US yields have declined for three consecutive sessions, with a slew of weak economic data propping up chances of a deeper interest rate cut by the Federal Reserve later this month.

US Treasury yields fell on Thursday and remained subdued in Asia hours, after private payrolls showed the smallest increase increased since January 2021 in August.

This data follows a weak manufacturing print and a steep drop in US job openings in July.

Market participants now await the non-farm payrolls data due after Indian market hours, which most believe would be the deciding factor for the Fed to opt for a 25 or 50 basis points cut.

Markets are fully pricing in a rate cut of at least 25 bps at the Fed's meeting this month, with expectations for a 50 bps remaining above 40 per cent from 30 per cent earlier this week.

Foreign investors, who have been major buyers of Indian government bonds over last few weeks, were also on the sidelines this week, awaiting clarity on rate cuts.