MUMBAI: Indian government bond yields are expected to start the week with a flattish trend, with focus shifting to domestic factors after the Federal Reserve started its rate easing cycle last week.
The benchmark 10-year yield is likely to move between 6.75% and 6.78% on Monday, compared with its previous close of 6.7626%, a trader with a primary dealership said.
“After an eventful last week, which led to rise in volumes as well as volatility, we may be in for some quiet trading sessions for a couple of days, with the next major triggers being the borrowing calendar,” the trader said.
India is likely to announce its borrowing calendar for October-March this week, with a debt sale worth 340 billion rupees ($4.07 billion), the last debt for the first half of the fiscal year, due on Friday.
New Delhi aims to raise 14.01 trillion rupees via sale of bonds this financial year, and would have completed raising 7.40 trillion rupees by end of this quarter.
The 10-year U.S. yield stayed above 3.70% mark, while the spread with two-year bond yield rose to its widest in 27 months, after Fed Governor Christopher Waller and Philadelphia Fed President Patrick Harker said the path of the economy justified the 50 basis points rate cut.
India bonds steady with focus on 10-year benchmark bond auction
The Fed has projected rates would fall by another 50 bps in 2024 and 100 bps in 2025, according the updated dot plot, but futures market expect cuts of 75 bps in 2024, with a toss up between a 25 or 50 bps cut in November.
The next Fed action would be data dependent and unless growth data worsens significantly, which is a low probability event, subsequent policy action would be a 25 bps cut, Deepak Agrawal, CIO debt at Kotak Mahindra Asset Management Co said.
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