MUMBAI: Indian government bond yields are expected to be largely unchanged in early trades on Monday, as traders await critical cues from US Federal Reserve’s policy review and the Reserve Bank of India’s unscheduled meeting of its rate-setting panel.
The benchmark Indian 10-year government bond yield is likely to be in a 7.40%-7.45% band, a trader with a private bank said.
The yield had ended at 7.4161% on Friday.
It fell 10 basis points last week, after having risen an aggregate 35 bps in previous six weeks.
“There is no major change in fundamentals, and hence we should see a very quiet opening, as well as a narrow trading range,” the trader said.
“Focus will remain on US, as well as Indian central bank meetings, scheduled later in the week.”
The Federal Reserve’s policy decision is due on Wednesday and commentary will be key. The Fed will mostly stick to its hawkish rhetoric until inflation starts to cool, said a trader with a private bank.
Fed funds futures are pricing in an 84% probability of a 75-basis-point rate hike this week, and a 47% chance of the same-sized increase in December, according to CME Group’s FedWatch tool.
US yields saw a sharp decline last week, with the 10-year yield posting its first weekly fall after rising for 12 consecutive weeks.
Traders will also await the outcome of RBI’s monetary policy committee meeting on Thursday.
Indian bond yields dip as US peers continue to fall
Reuters reported last week that the meeting was most likely to discuss the central bank’s response to the government after its failure to stick to its inflation target for three quarters in a row.
Meanwhile, markets will also eye global oil prices that eased over concerns that widening COVID-19 curbs in China will curtail demand, offsetting signs that output at the top US shale field is losing steam.
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