Indian Bond Yields Steady Ahead of Large Debt Sale

India's government bond yields held steady on Friday as traders awaited a large debt sale that will test demand. The benchmark 6.94% 2036 bond yield was flat at 6.9632%, on track for its third consecutive weekly rise, up 5 basis points so far.

The Indian government is set to auction 320 billion rupees ($3.39 billion) of bonds later in the day, including 210 billion rupees of a new five-year benchmark. Five-year notes have attracted strong demand in recent months, as banks likely channelled inflows from India's diaspora deposit scheme into the segment.

Alok Sharma, head of treasury at ICBC, noted that three forces will drive markets: the September 15 to 16 FOMC meeting, crude near $95 a barrel, and the pace of RBI liquidity absorption. Federal Reserve Governor Christopher Waller said he would support holding rates steady at the next policy meeting if incoming data confirms easing inflation pressures.

India's overnight indexed swaps fell as oil prices steadied. The one-year rate was down 1 bp at 5.99%, while the two-year rate and the five-year rate both fell 1.75 bps to 6.17% and 6.4675%, respectively.