Indian bonds trade mixed ahead of gilts auction; weak Q2 GDP supports short-term debt

The Indian bonds traded mixed Thursday ahead of the benchmark 10-year gilts auction, which is scheduled to be held on Friday. Also, weakness in the second quarter gross domestic product (GDP) growth pushed bond prices on the short-end curves.

The yield on the benchmark 10-year bonds, which moves inversely to its price, remained steady at 7.111 percent, the 11-year note yield climbed more than 2 basis points to 7.229 percent, the 6-year Treasury yield fell more than 2 basis points to 7.085 percent and the 5-year note yield slid 1/2 basis point to 7.014 percent by 07:00 GMT.

India’s second quarter GDP growth slows to 7.1 percent q/q, compared to 7.9 percent in January-March quarter driven by the slowdown in mining, construction and farm sectors. This was the lowest print recorded in last six quarters.

According to Reuters, the Reserve Bank of India will auction four bonds for 140 billion rupees this week including 80 billion rupees of the benchmark 10-year paper, which will take its issuance to 870 billion rupees.

Moreover, investors will remain keen to focus on the joining of hawkish Urjit Patel as the new governor of the Reserve Bank of India, with effect from September 4. Urijit Patel, current deputy governor, was expected as the only hawkish candidate for Governor chair. As Chairman of the Urjit Patel committee, he advised moving to a consumer inflation target of 4 – 2 percent and towards positive real interest rates.

Meanwhile, the Sensex rose 0.27 percent or 83.77 points to 28,535.94 and Nifty-50 futures traded 0.03 percent higher or 2.60 points at 8,841 by 07:20 GMT.