MUMBAI: Indian government bond yields were lower on Wednesday, mirroring a similar move in US yields, after a softer on-year rise in US consumer prices buoyed bets for a slowdown in rate hikes by the Federal Reserve.
The benchmark 10-year yield was at 7.2451% as of 10:05 a.m. IST after ending lower at 7.2658% on Tuesday. “We have seen the second round of bond rally today, after soft inflation reading that has cemented bets of a dovish shift in the Fed after today’s rate hike.
That will see the third round of rally,“ a trader with a primary dealership said. US consumer prices barely rose in November - just 0.1% - after advancing 0.4% in October.
Economists had expected the reading at 0.3%. In the 12 months through November, the CPI climbed 7.1%, its smallest advance since December 2021.
This was preceded by a 7.7% rise in October. The annual CPI peaked at 9.1% in June, its sharpest increase since November 1981.
The Fed is expected to scale back its rate hike to 50 basis points (bps) later in the day.
Since March, it has raised the rate by 375 bps, including four back-to-back hikes of 75 bps each.
Indian bond yields seen steady ahead of Nov inflation data
The 10-year yield stayed below 3.50%, while the two-year yield - a closer indicator of interest rate expectations - dipped below 4.20%.
The US data comes after India’s retail inflation reading showed a moderation, rising 5.88% in November against a 6.77% increase in October, well below a Reuters poll median estimate of 6.40%.
Some analysts are now pencilling in a lower probability of another rate hike from the Reserve Bank of India (RBI) in February.
The RBI has raised the repo rate by 225 bps since May to control inflation, which stayed above its upper tolerance range for 10 months through October.
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