2024-01-16 02:34:08
Indian government bond yields are expected to rise slightly in early trade on Tuesday, tracking their U.S. counterparts, as traders await a bond auction by states.
The benchmark 10-year yield is expected to move in a range of 7.14%-7.18%, after closing at 7.1518%, a trader at a major brokerage said.
“As we failed to cross the 7.12% mark for the benchmark yield, there was some selling towards the end of yesterday’s extended session, and we are now back to levels of around 7.15%, which should be the case, unless there is a new bullish element,” the trader said.
Indian states plan to raise 192 billion rupees ($2.32 billion) through bond sales on Tuesday, and the amount is lower than expected for the second week in a row.
Bond yields ended lower on Monday after India’s core inflation showed a downward trend in December, and market participants expect inflationary pressures to ease now.
India’s annual retail inflation rose to 5.69% in December, up from 5.55% in November, but lower than a Archyde.com poll of 5.87%. Core inflation, which excludes volatile food and energy prices, was estimated at 3.76%, its lowest level in four years, according to ICICI Securities Primary Dealership.
A sustained fall in core inflation could prompt the Reserve Bank of India (RBI) to ease policy to a “neutral” level as early as next month, economists say.
The RBI has maintained rates since April 2023, after raising them by 250 basis points in the previous financial year to combat high inflation.
Futures showed the US 10-year yield hovering around 4%. The markets of the world’s largest economy were closed on Monday.
U.S. yields fell last week after December producer price data fell unexpectedly, raising bets of an early interest rate cut by the Federal Reserve. The odds of a rate cut in March stand at about 71%, according to the CME’s FedWatch tool.
KEY INDICATORS:
** Brent down 0.1% to $78.05 a barrel, after falling 0.2% in the previous session.
**10-year U.S. Treasury yield at 4.0069%, two-year yield at 4.2112%.
**Nine states to raise 192 billion rupees through bond sale ($1 = 82.9310 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Varun HK)
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