Indian government bonds extended losses on Friday, keeping the 10-year yield at a more than two-month high, ahead of a hefty sale of the benchmark note and Federal Reserve Chair Kevin Warsh's key address.
Global markets will closely watch Warsh's first Jackson Hole speech for signals on the U.S. policy outlook and inflation strategy. Fed officials on Thursday reiterated concerns over sticky inflation.
The Fed chief's remarks could shape expectations for Indian policy rates, after hawkish minutes from the Reserve Bank of India's August meeting revived bets on domestic rate hikes.
India's benchmark 6.94% 2036 yield was at 6.9079% at 11:20 a.m. IST, up nearly 2 basis points from Thursday's close and hovering at its intraday highest since June 18. Bond prices move inversely to yields.
New Delhi is selling 340 billion rupees ($3.56 billion) of the benchmark note, which will raise its outstanding to 1.8 trillion rupees.
A sustained break of the key 6.90% level could open the way to 6.95% for the benchmark yield, a private-bank trader said. "Cutoff levels at the auction will offer a clearer gauge of demand and set the near-term tone for yields," the trader said.
Separately, Brent crude futures eased 5% in Asian trade as war mediators placed renewed emphasis on reopening the Strait of Hormuz, offering some relief.
The contract had climbed to $94 per barrel on Thursday, after a Wall Street Journal report said U.S. President Donald Trump was not inclined to return to an interim peace deal reached with Iran in June.
RATES
India's overnight indexed swaps were mixed in early trade.
The one-year swap was down 2 bps at 5.90%, while the two-year and the five-year rates were little changed at 6.11% and 6.43%, respectively.
