India bonds stuck as trading interest plummets

MUMBAI, July 17 (Reuters) - Indian government bonds barely moved in early deals on Thursday, as weary traders stayed on the sidelines, awaiting fresh cues for direction.

The yield on the benchmark 10-year bond was at 6.3118% as of 10:00 a.m. IST, after closing at 6.3118% on Wednesday.

Traders largely tapped the old 10-year 6.79% bond, with the yield on the bond steady at 6.3759%, compared with the previous close of 6.3753%.

Trading volumes nosedived on Wednesday, falling to the lowest since December 2024, due to a lack of trading interest this week.

Trades worth only 212.69 billion rupees ($2.48 billion) were struck on Wednesday, CCIL data showed, with volumes less than half of the daily average for July.

This comes as higher U.S. Treasury yields have offset any positive domestic cues, such as lower inflation and rising rate cut wagers, traders said.

"There aren't any incentives to trade at the moment," a trader at a private bank said.

"Only investors would take positions as per their needs in the upcoming auction."

The Reserve Bank of India will sell bonds worth 270 billion rupees ($3.14 billion) on Friday, including a new five-year paper. The cutoffs will provide insight into demand for shorter tenors.

The U.S. 10-year bond yield has risen 23 basis points since July 1, stoking uncertainty in the domestic market.

It was trading at 4.4794% in Asian hours, up from Wednesday's close of 4.4550%.

India's retail inflation slipped to 2.10% in June, the slowest pace in more than six years, down from 2.82% in May.

An estimated drop to a record low in July is prompting calls for at least one more rate cut this year.

RATES

India's shorter overnight index swap rates (OIS) were little changed, while the liquid 5-year rates saw a receiving bias.

The one-year

rate was steady at 5.5200% and the two-year OIS rate was at 5.4950%. The liquid five-year fell to 5.7275%. ($1 = 85.8375 Indian rupees) (Reporting by Khushi Malhotra; Editing by Sumana Nandy)

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