Indian Government Bonds Trade in Narrow Range as Markets Await Domestic Catalyst

Indian government bonds traded in a narrow range early on Tuesday as market participants awaited a firm domestic catalyst to drive further moves. Bond prices move inversely to yields. The yield on the benchmark 10-year bond was at 6.2943% as of 9:45 AM IST, after closing at 6.2933% on Monday. Traders noted that there are no clear cues for traders to take the yields in any direction, leading to expectations of light trading this week. Treasury yields rose on Monday following President Donald Trump's announcement of tariffs on trading partners, including a 25% levy on imports from Japan and South Korea beginning August 1. Yield trends have been influenced by traders' bets on the quantum of rate cuts by the Federal Reserve this year. Meanwhile, oil prices also rose amidst signs of strong demand outweighing the impact of a higher-than-expected output hike for August by the Organization of the Petroleum Exporting Countries and allies. Traders are also keeping an eye on the Reserve Bank of India's move on liquidity management, as banking system liquidity surplus remains elevated. Rates in India's overnight index swap rates did not see significant activity, as traders await more cues. The one-year OIS rate and the two-year OIS rate were not yet traded, after ending at 5.51% and 5.48% respectively. The liquid five-year was marginally higher at 5.69%.