Indian government bonds edged higher early Thursday, extending gains from the prior day’s rally after the central bank’s dovish policy stance. Investors stayed cautious before Friday’s debt sale. The benchmark 6.94% 2036 bond yield reached 6.7588% at 11:10 a.m. IST, compared with 6.7722% at Wednesday’s close after a nearly 5 basis point drop. New Delhi will auction 320 billion rupees of bonds on Friday, including the liquid five-year note. The sale will test whether buying interest can sustain the advance sparked by the Reserve Bank of India’s policy and lower oil prices easing inflation concerns. The RBI left the repo rate unchanged but cut its average inflation forecast to 5.0% from 5.1% and its core inflation projection to 4.3% from 4.7%. Oil traded near $79 a barrel in Asia. Foreign banks bought 91 billion rupees of bonds Wednesday while state-run banks sold a similar amount to lock in profits. Analysts expect the market to stabilize with a positive bias and 10-year yields between 6.65% and 6.85%. Overnight index swap rates fell further as oil and U.S. yields eased, with the 10-year U.S. yield steady at 4.61%.
