India bond traders watch debt sale and data for market direction

Indian government bond yields held steady in early trading on Friday. Traders waited for fresh supply from the weekly debt auction and key data to guide market movements. At 10:00 a.m. IST, the 10-year bond yield stood at 6.7625%, nearly unchanged from the previous close of 6.7646%.

Later in the day, New Delhi plans to raise 220 billion rupees ($2.56 billion) through the bond sale. Traders expect the demand at the auction and U.S. jobs and inflation data to influence the market in the short term.

U.S. Treasury yields remain high, with the 10-year yield around 4.68% ahead of a key jobs report. The data could play a significant role in shaping expectations for the Federal Reserve’s monetary policy. The nonfarm payroll report for December, due after Indian market hours, will shed light on whether the Fed’s forecast of just two rate cuts this year is likely to hold.

Rising U.S. yields are partly driven by concerns that President Donald Trump’s policies could reignite inflation, potentially delaying rate cuts. In fact, interest rate futures now price in only 43 basis points of U.S. rate cuts in 2025, which is less than the Fed’s forecast of 50 basis points.

In the U.S., the upcoming jobs data will be followed by inflation readings from both the U.S. and India. These reports will be crucial as both countries’ central banks prepare for their next policy decisions. Earlier this week, India’s benchmark bond yield fell to a three-week low of 6.73%, driven by strong buying from foreign banks. However, those lenders later sold bonds as U.S. yields surged.

Traders now focus on the debt auction and the upcoming data to determine the next steps for the market. With U.S. yields influencing global trends, the impact of the upcoming jobs and inflation reports will likely resonate in Indian bond markets as well.