MUMBAI: Indian government bond yields trended lower early Tuesday after the benchmark US yield eased below 4%, allaying concerns they would break past an important technical level on the higher side.
The benchmark 7.26% 2033 bond yield was trading at 7.1130% as of 10:00 a.m. IST, after ending the previous session at 7.1337%.
The threat of US yields breaking an upper key level was gone for now, giving local bond yields some downward movement, a trader with a private bank said.
“Still, a break of 7.10% at the bottom seems tough, as any untoward surprise in inflation could again see a sharp reversal in yields,” the trader added.
US yields eased on Tuesday and the inversion in a key part of the yield curve contracted as investors waited for inflation data, due on Wednesday, for further clues on whether price pressures are continuing to moderate.
The 10-year yield was at 3.98% on Tuesday, after hitting a high of 4.09% on Monday, while the two-year yield was at 4.86%.
Indian bond yields eye US peers, key inflation data for triggers
The inversion eased by nearly 20 basis points (bps) to 87 bps on Tuesday.
The Fed had paused its rate hike cycle in June, but the minutes released last week reiterated that it may raise rates by another 50 bps in 2023.
The odds of a 25-bps hike in July remain around 91%. Indian bond yields had also inched higher, tracking the massive upward move in US peers, but are off highs now as traders eye local retail inflation print for June due on Wednesday.
India’s inflation likely snapped a four-month decline in June as food prices surged, a Reuters poll of 55 economists found.
The poll predicts retail inflation rose 4.58% on-year in June, slightly faster than the 4.25% recorded in May.
Meanwhile, Indian states aim to raise 104 billion rupees ($1.26 billion) through sale of bonds later in the day.
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