Fresh debt supply to provide directional cue for India bonds

MUMBAI: Indian government bonds could see a stable opening on Friday, as market participants await fresh debt supply through the weekly auction, even as elevated oil prices continue to act as a drag, especially for the longer-duration notes. The yield on the benchmark 6.94% 2036 bond is expected to trade between 6.94% and 6.99%, a trader at a private bank said, after closing at 6.9646% in the previous session. New Delhi is expected to sell bonds worth 320 billion rupees ($3.39 billion), which includes 210 billion rupees of a new 5-year paper later in the day. Demand for the shorter-duration debt has improved after way larger-than-anticipated inflows through the central bank’s special schemes. India’s banking system liquidity surplus has jumped to a record high of 9.7 trillion rupees as of September 3, after Indian banks raised $127.23 billion through a non-resident foreign-currency deposit scheme announced by the Reserve Bank of India. These funds are anticipated to be utilised towards deployment in the up to 5-year government bonds, especially from foreign banks. “The demand and cutoff for the new paper would provide an idea about the depth of investor appetite after the spike in