MUMBAI: Indian government bond yields ended marginally higher on Thursday, amid cautious sentiment ahead of the minutes of the Reserve Bank of India’s (RBI) latest monetary policy meeting due later in the day.
The benchmark 7.26% 2033 bond yield ended at 7.0871%, after closing at 7.0676% in the previous session.
The benchmark bond yield’s near-term range has shifted upwards from 6.95%-7.00% levels to 7.03%-7.08% band, traders said.
Indian bond yields eye Fed comments, RBI policy minutes for cues
The five-year overnight indexed swap (OIS) rate jumped to its highest level since April 6, before the RBI paused rate hikes for the first time after six consecutive increases.
“There are no key triggers for the market and limited scope for a sharp movement, as the U.S. Federal Reserve’s tone is still hawkish, with most now expecting one more hike,” said Ajay Manglunia, managing director and head of investment grade group at JM Financial.
Fed Chair Jerome Powell said on Wednesday he would not characterise the central bank holding interest rates steady as a “pause,” and that a majority of policymakers see two more quarter-point rate increases as likely by the end of the year.
Powell said inflation pressures continue to run high and the process of bringing it back to 2% “has a long way to go.”
In the June meeting, the Fed had kept interest rates unchanged but warned of a half-percentage point hike in 2023. The odds of a rate hike in July stand at around 72%.
The RBI kept its interest rate unchanged for the second consecutive month in June, and the minutes from the meeting are being keenly watched to gauge its interest rate trajectory and inflation commentary.
Traders also await the central government’s weekly debt auction due on Friday, wherein New Delhi will aim to raise 310 billion rupees ($3.78 billion).
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