Government bond yields hold steady after state debt surge, eyes on Friday's auction

The government bond yields ended broadly unchanged on Tuesday, after the heavy sale of debt from states added to fresh supply, while focus was also on the weekly auction on Friday.

The benchmark 10-year yield ended at 6.7604%, compared with its previous close of 6.7682%.

Earlier in the day Indian states raised 344 billion rupees ($4.11 billion) through a sale of bonds, the last auction for April-September. The quantum was higher than the scheduled 269.6 billion rupees.

New Delhi will sell bonds worth 340 billion rupees on Friday, which includes the liquid five-year and 15-year bonds, in the final debt sale for the first half of the fiscal year.

India is expected to announce its borrowing calendar for the October-March period later this week, and traders will also keep a close eye on the treasury bill supply.

The Indian government aims to raise 14.01 trillion rupees through bond sales in the current fiscal year and has already secured 7.40 trillion rupees in April-September. This leaves approximately 6.6 trillion rupees for the second half.

Meanwhile, the 10-year US Treasury yield inched towards 3.80% in Asia hours after rising overnight, as investors continued to price out near-term recession amid data showing increased price pressures that could slow the pace of the Federal Reserve's easing cycle.

The development comes after the Fed started its rate easing cycle with a bumper 50-basis-point cut last week.

"Given the onset of the Fed easing cycle, easy domestic liquidity conditions and improving interest rate differentials, we now expect the 10-year G-sec yield to trade in the 6.60%-6.85% in the near term," Upasna Bhardwaj, chief economist at Kotak Mahindra Bank said.

Elsewhere, China's central bank announced broad monetary stimulus and property market support measures to revive its economy.