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MUMBAI: Indian government bond yields ended marginally higher on Monday, tracking a rise in U.S yields in anticipation of another rate hike by the U.S. Federal Reserve early next month.

The 10-year benchmark 7.26% 2032 bond yield ended at 7.2475%, after closing at 7.2252% on Thursday. Indian markets were shut on Friday for a public holiday.

“The yields have been rangebound in the absence of major triggers. U.S. yields provided cues for today’s movement but the next key trigger could be the minutes from the Reserve Bank of India’s (RBI) latest policy meeting,” a dealer with a state-run bank said.

India bond yields tad higher ahead of debt auction

U.S. yields rose, with the 10-year inching above the 3.50% mark on Friday, as data showed the world’s largest economy is not slowing quickly enough to deter the Fed from raising interest rates in May.

Comments by Fed Governor Christopher Waller on Friday further raised the rate-increase outlook and reduced bets of easing this year.

The chances of a rate hike in May have risen above 85%, against around 70% before the comments. The current target range is 4.75%-5.00%, up from near zero last March.

On the domestic front, the minutes from the RBI’s April policy meeting are due on Thursday. The central bank unexpectedly paused rate hikes in its last meeting, after 250 basis points (bps) worth of hikes, to 6.50%.

“The next major cues are Fed policy in May and RBI policy in June,” Shrisha Acharya, a fixed income trader at DCB Bank said. Till the end of April, the benchmark bond yield will move in the range of 7.18%-7.26%, he added.

Amid lack of major triggers, trading volume is expected to drop in the second half of April, traders have said. They also await debt supply on Friday, wherein the government is scheduled to raise 330 billion rupees ($4.03 billion).

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