MUMBAI: Indian government bond yields are expected to be largely unchanged in early session on Monday amid consolidation after the benchmark bond yield posted its biggest weekly rise in over four months in the previous week.
The benchmark 7.26% 2033 bond yield is likely to be in the 7.13%-7.18% range after ending the previous session at 7.1614%, a trader with a state-run bank said.
The yield jumped eight basis points last week, its biggest such move since the week ended February 10.
“Sentiment has turned highly negative for the bulls, which led to sharp one-way move last week, and with no major positives, we may see this trend continue, but the pace may be slow and there should be consolidation at every rise in yield,” the trader said.
Local bond yields rose tracking a spike in US yields, with the 10-year paper crossing the 4% mark. Still, yields eased somewhat after inflation as measured by the personal consumption expenditures (PCE) price index rose 0.2% last month after edging up 0.1% in May.
In the 12 months through June, the PCE price index advanced 3.0%, the smallest annual gain since March 2021, and followed a 3.8% rise in May. Last week, the Federal Reserve raised interest rates by 25 basis points (bps) and indicated another increase, but the market was not convinced by it.
India benchmark bond yield sees biggest daily rise in a month, jumps for week
The odds of such a move are just 20%. Sentiment also soured after higher-than-expected cutoff yield for the benchmark paper at an auction on Friday, wherein New Delhi raised 330 billion rupees ($4.01 billion).
Traders also remain worried about rising local inflation which could force the Reserve Bank of India to opt for a hawkish stance in the upcoming monetary policy review.
India’s retail inflation jumped to 4.81% in June, after easing in the previous four months and economists now expect the July reading to rise above 6%, which is the upper end of the RBI’s medium-term target.
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