India bond yields lower as Fed minutes suggest slower rate hikes, sentiment positive

MUMBAI: India’s government bond yields were lower in early trade on Thursday as the minutes from the US Federal Reserve’s November policy meeting signalled slower rate hikes.

An overnight fall in US yields and oil prices also aided market sentiment. The benchmark 10-year government bond yield was at 7.2794% as of 0514 GMT, after closing at 7.2910% on Wednesday.

It opened at an intraday low of 7.2504%.

India’s benchmark 10-year bonds opened positive today, on the back of the Fed minutes with the rupee and oil remaining contained, Anitha Rangan, economist and associate director at Equirus Group said.

The minutes showed that a “substantial majority” of policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes.

“The pace is moderate but not the hikes themselves. Following the minutes, the US initial jobless claims also inched higher. However, the market would read it as a positive as smaller-sized hikes always leave the door open for a lower terminal rate, if inflation data is supportive,” she added.

The US central bank had raised its policy rates by 75 basis points (bps) for the fourth straight time in November.

India bond yields lower ahead of fresh debt supply

Slowing US inflation had lessened fears of more aggressive rate hikes.

On Wednesday, the 10-year US yield fell by 5 bps to 3.7090%, while oil prices fell, extending losses from the previous session, as supply-disruption fears eased on news that the Group of Seven nations were considering a high price cap on Russian oil.

O/R The broader market sentiment is positive, which led to a rally in prices at the opening.

The yields could go below the 7.25%-level but are unlikely to stay there, said a treasury head at a state-run bank.

During the day, yields are likely to move in the 7.25%-7.29% band.

If at all there’s profit booking and selling pressure later in the day, the yields will find support at 7.32%-level and then again at 7.35%, a trader at a private bank said.