MUMBAI, Jan 30 (Reuters) - Indian government bond yields were largely unchanged in a choppy early session on Monday as caution prevailed before the Union budget and another elevated borrowing plan from states.
Bond yields had dipped in opening trading with the federal government likely capping its gross market borrowing below 16 trillion rupees for the next financial year, Reuters said in a report, citing two sources.
The benchmark 10-year yield was at 7.3800% as of 10:25 a.m. IST, after closing at 7.3874% on Friday, posting its second consecutive weekly rise.
It had risen by nine basis points in the last two weeks.
The market is cautious over fears of an elevated borrowing plan for the next fiscal year, while the run-up to the budget is filled with heavy supply.
Indian states aim to raise 258.05 billion rupees through a sale of bonds on Tuesday, the second consecutive week when the quantum has risen above the 250 billion rupee mark.
Last week, the government raised 300 billion rupees through a weekly debt sale and another 80 billion rupees through the first-ever sovereign green bond issuance, which was largely subscribed by local banks and a large state-run insurance company.
Continuous debt sales have been testing investor appetite as traders shy away from adding more positions before the budget announcement on Wednesday.
There is still some comfort over the report that the government does not want to destabilise the bond market with any negative surprises, traders add.
"Feedback from market participants is that a borrowing of 15.5-16 trillion rupees can be absorbed well in the next financial year," one of the officials said.
A Reuters poll had pegged the borrowing at a record 16 trillion rupees, while some market participants had feared the borrowing to be around 17 trillion rupees.
($1 = 81.6925 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
