MUMBAI: Indian government bond yields are likely to be largely unchanged in the early session on Wednesday as traders remain focussed on comments from the US Federal Reserve and the minutes of the Reserve Bank of India’s latest policy meet.
The benchmark 7.26% 2033 bond yield is expected to be in the 7.03-7.07% range after closing at 7.0583% in the previous session, a trader with a primary dealership said.
“We are in for another lacklustre trading session with yields moving sideways, and some action could be expected in the next couple of days, which are lined up with events,” the trader said.
Federal Reserve officials are due to speak later in the day while Chair Jerome Powell’s congressional testimony on the economy on Wednesday and Thursday will be the highlight, potentially offering more insight into the path of interest rates.
Last week, the Fed kept interest rates unchanged but warned of a half-percentage point hike in 2023.
Indian bond yields seen little changed as traders eye fresh cues
Still, many market participants expect the Fed to raise rates only once and stop the hiking cycle.
The odds of a rate hike in July stand at around 72%. Back home, traders await minutes of the RBI’s June meeting, which will be released on Thursday.
The central bank had kept interest rates unchanged for the second consecutive time at this meeting, but said inflation needed to move towards its 4% target and that it would do “whatever is necessary to ensure that long-term inflation expectations remain firmly anchored.”
“We are in a wait-and-watch mode on food inflation, and RBI is justified in thinking about possible pressure on inflation during the second half of the year,” said Suyash Choudhary, head of fixed income at Bandhan Asset Management.
Post the minutes, traders will check out the demand at the central government’s weekly debt auction due on Friday, when New Delhi aims to raise 310 billion rupees ($3.78 billion), including a liquid 14-year bond.
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