MUMBAI: Indian government bond yields are expected to remain largely unchanged in early session on Thursday as traders await fresh cues ahead of the latest local growth data.
The benchmark 7.26% 2033 bond yield is likely to be in the 7.16%-7.20% range after ending the previous session at 7.1850%, a trader with a private bank said.
“There were attempts to break the 7.15% mark on the downside on multiple occasions. Since that has failed, we may now see rangebound trading with the chances of 7.20% being broken on the upside,” the trader said.
India’s economic growth likely accelerated to 7.7%, the fastest annual pace in a year, on robust service sector growth, strong demand and increased government capital expenditure, a Reuters poll found.
All but two of the 51 economists surveyed between Aug. 18 and Aug. 24 expected the GDP growth to beat the January-March quarter’s 6.1% rate.
Meanwhile, U.S. yields remained largely steady as weaker-than-expected growth and labour market data toned down expectations that the Federal Reserve will maintain rates higher for a longer period.
India bond yields seen easing as US peers drop
The 10-year yield was around the crucial 4.10% mark, more than 25 basis points lower than the 16-year high levels touched last week. The odds of a rate hike in September have eased further.
Traders will also keep an eye on the domestic inflation trajectory, especially after the government cut cooking gas prices, as well as evolving liquidity conditions.
The inflation impact of the move is estimated at 20 bps to 30 bps and will be seen in the September print, said IDFC First Bank, which estimated the August reading at 7.1%.
India’s retail inflation spiked to a 15-month high of 7.44% in July from 4.87% in June. Inflation will remain above the Reserve Bank of India’s upper tolerance band at least until October, according to a Reuters poll of economists.
Key indicators:
Brent crude futures little changed at $85.85 per barrel, after rising 0.4% in the previous session
10-year U.S. Treasury yield at 4.1139%, two-year yield at 4.8880%
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