MUMBAI: Indian government bond yields are expected to ease in early deals on Tuesday, tracking a fall in US peers as President Donald Trump did not impose major tariffs after his inauguration, suggesting a gradual approach to policies.
The 10-year bond yield is likely to move between 6.71% and 6.76%, a trader with a private bank said, compared with Monday’s close of 6.7610%.
“For the time being, we can have some relief rally in local bond prices as Trump has not announced any significant measure that could impact inflation, and hence we are seeing some bullish moves in Treasuries as well,” the trader said.
“Increase in the amount of repo infusion as well as announcement of another buyback from the government are also positives.”
Indian bond yields a tad higher as caution prevails before Trump takes charge
Trump said he was thinking of imposing 25% tariffs on imports from Canada and Mexico because they were allowing many people to cross the border, but refrained from any other tariff-related announcement. Treasury yields eased as the first set of announcements are not expected to fuel inflationary pressures.
The 10-year US yield eased six basis points in Asian trading hours on Tuesday and was around 4.55%.
US rate futures have now priced in 43 basis points of interest rate cuts in 2025, up from around 39 bps before Trump’s inauguration.
The market also expects a 66% chance that the next cut will be in June.
Back home, the Reserve Bank of India raised the quantum of liquidity that it will infuse though the daily variable rate repo to 1.50 trillion rupees ($17.37 billion).
The central government also announced its third debt buyback in as many weeks, which could favour the bulls.
Focus also continues to remain on the RBI’s liquidity management, as the daily repo rates are solving the problem of overnight cash management, but do not infuse durable liquidity.
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