MUMBAI: Indian government bond yields are likely to rise at the open on Tuesday after a decline in their US peers, fuelled by a news report about President-elect Donald Trump considering a reduced tariff plan, did not sustain.
The 10-year bond yield is likely to move between 6.74% and 6.78%, a fixed-income trader at a bank said, having dropped 3 basis points on Monday to 6.7483%.
A large part of the drop in yields on Monday happened late in the session, tracking the decline in US yields.
US yields dropped after the Washington Post reported that Trump’s aides are exploring a narrower approach to tariffs, focused on certain critical sectors.
The 10-year US yield dropped to 4.5750%.
The decline did not last as Trump denied the report on his Truth Social platform, with the 10-year climbing back to 4.62%.
There “will be a bit of a giveaway today” on Indian bonds, in line with what happened with US yields, the fixed income trader said.
However, the quick drop on Monday does show that a large part of the market “is itching to buy”, he added.
India bond yields rise in lead up to domestic inflation data
Expectations that the Reserve Bank of India could cut rates when it meets next month is likely to keep a cap on yields, while the expected higher supply is providing a floor, according to traders.
Indian states aim to borrow a record 4.73 trillion rupees ($55.16 billion), and the central government aims to raise 2.79 trillion rupees by March.
The RBI’s decision regarding cutting rates at its February meeting is dependent on the December inflation data, due next Monday.
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