MUMBAI - Indian government bond yields ended higher on Tuesday as heavy bond sales from states weighed on sentiment, with market focus shifting to New Delhi's April-September borrowing plan.
The 10-year benchmark 7.26% 2032 bond yield ended at 7.3240% after closing at 7.3035% on Monday.
"Inflows into insurance led to decent demand at the state debt auction without having any material impact on yields," a trader with a primary dealership said.
Indian states raised 412.14 billion rupees ($5.01 billion) through the sale of bonds maturing in five years to 30 years earlier in the day, which was slightly lower than the planned 427.13 billion rupees. The quantum was still the highest ever for a single auction, according to traders.
States have raised 7.58 trillion rupees through the sale of bonds in the current financial year, higher than last year's 7.02 trillion rupees.
Most traders now await the central government's borrowing calendar for April-September, likely to be published by end of this week. They expect the borrowing to be between 55% and 58% of its gross annual target of 15.43 trillion rupees.
"We expect the benchmark bond yield to trade in the 7.25%-7.45% range in the near term, and major focus would remain on borrowing calendar as well as the central bank policy meeting," said Murthy Nagarajan, head of fixed income investments at Tata Asset Management.
The borrowing calendar would be followed by the Reserve Bank of India's key monetary policy decision on April 6. The RBI has raised the repo rate by 250 bps to 6.50% in this financial year.
Market participants broadly expect another 25 bps hike due to elevated headline inflation, while core inflation remains sticky.
Barclays expects the RBI to hike the rate in April, the last in the current cycle, but does not foresee any rate cuts in 2023/24. ($1 = 82.1875 Indian rupees)
(Reporting by Bhakti Tambe; Editing by Sohini Goswami)