India bonds yields track US peers higher

MUMBAI: Indian government bond yields were higher at the beginning of the week following a rise in US peers, after consumer inflation expectations in the world’s largest economy rose in July.

The benchmark 7.26% 2033 bond yield was trading at 7.1051% as of 10:20 a.m. IST after ending the previous session at 7.0910%.

“The rise in US yields led to a slight uptick in benchmark yields but throughout the day they are expected to remain rangebound amid lack of strong triggers,” a trader with a primary dealership said.

India bond yields may ease more tracking US peers, debt sale eyed

Benchmark 10-year US Treasury yields rose on Friday after consumers lifted their inflation expectations in July. The 10-year US yield was at 3.8145%, while 2-year US yield was at 4.7720%.

The University of Michigan’s preliminary reading on the overall index of consumer sentiment showed that US consumer sentiment jumped to the highest level in nearly two years in July.

The survey’s reading of one-year inflation expectations inched up to 3.4% this month from 3.3% in June.

Market participants now wait to evaluate Federal Reserve Chairman Jerome Powell’s tone at the US central bank’s July meeting for further indications on whether it is likely to continue raising rates beyond a highly anticipated 25 basis points increase this month.

The odds of a 25-basis point hike in July remain around 92%, but that of another hike after that have come down.

“The benchmark bond yield will remain in 7.05%-7.15% range till the Reserve Bank of India’s (RBI) monetary policy in August. We may see some buying interest at 7.12%-level,” a dealer at a state-run bank said.

The RBI maintained status quo on policy rates in its previous two meetings after hiking by 250 bps in the last financial year, but now aims to meet the 4% inflation target which has pushed back bets of rate cut.

Surging food prices accelerated India’s June retail inflation rate to 4.81%, snapping four months of easing and higher than the revised 4.31% for May and 4.58% expected in a Reuters poll.