INDIA BONDS-India bonds stay put as traders wait for next set of triggers

By Khushi Malhotra

MUMBAI, July 7 (Reuters) - Indian government bonds were little changed on Monday, with ample liquidity cushioning sentiment as traders looked past the rupee's fall and awaited cues from U.S. yields and global tariff developments.

The yield on the benchmark 10-year bond IN063335G=CC ended at 6.2933%, compared with previous close of 6.2947%.

Bond yields move inversely to prices.

"6.30%-6.32% is where there is congestion for the new 10-year bond," said Alok Sharma, head of treasury at ICBC, adding that the best part of the curve was the 5-6 year segment, where investors could easily get 80-85 basis points spread over overnight rates.

The yield on the five-year 6.75% 2029 bond IN067529G=CC was at 6.06%, while the weighted average interbank call money rate was at 5.27%.

In the absence of any major domestic factors, traders will closely eye the U.S Treasury yields and developments on the tariffs.

The 10-year U.S. yield was at 4.35% in Asian hours.

The U.S. President Donald Trump said he will impose an additional 10% tariff on any countries aligning themselves with the "Anti-American policies" of the BRICS group of developing nations, whose leaders kicked off a summit in Brazil on Sunday.

The rupee INR=IN declined to a low of 86.0275 per U.S. dollar during the session, but pared losses to close at 85.85 per U.S. dollar.

Meanwhile, India's liquidity surplus ballooned on rising government spending.

The country's daily average banking system liquidity surplus jumped to 3.3 trillion rupees ($38.38 billion) last week, the highest since the week ended June 10, 2022.

RATES

India's overnight index swap (OIS) rates lumbered sideways on Monday, amid a lack of action in government bonds.

The one-year INR1YMIBROIS=CC OIS rate was up 1 basis point at 5.51%, the two-year rate INR2YMIBROIS=CC was flat at 5.47%, while the liquid five-year INR5YMIBROIS=CC swap stayed glued at 5.68%.

($1 = 85.9875 Indian rupees)