Indian bond yields steady; state debt auction upcoming

Indian government bond yields remained mostly steady on Tuesday. The benchmark 10-year yield was at 6.6932% early in the day. This is a slight increase from the previous close of 6.6896%. Investors are turning their attention to a state debt auction. Indian states are looking to raise 521.20 billion rupees, about $6.01 billion, through bond sales. This amount is over 100 billion rupees higher than initial plans. Central government debt auctions will not resume until the new fiscal year starts on April 1. In the meantime, corporate bond issuances are also competing for attention. Indian companies are expected to raise nearly $3 billion on Monday and Tuesday. Traders believe this supply will not be fully absorbed, which may lead to rising yields. The banking system's liquidity remains tight, with a deficit of about 2.43 trillion rupees. The premium that states must pay over central government bond yields has reached a one-year high. This trend is expected to continue at today’s auction. Additionally, the Reserve Bank of India will purchase bonds worth 500 billion rupees later today. This might be the last such purchase for this financial year. Traders are also closely watching the U.S. Federal Reserve's policy decision scheduled for Wednesday. There are concerns about a potential economic slowdown following weaker-than-expected U.S. retail sales data.