MUMBAI: Indian government bond yields are expected to fall in the early session on Monday, tracking a slump in US peers, while major moves would be dominated by the local central bank’s monetary policy decision and US inflation data.
The benchmark 7.26% 2033 bond yield is likely to be in the 7.14%-7.19% range after ending the previous session at 7.1915%, a trader with a state-run bank said.
“Indian bond yields are very closely tracking Treasuries, and such a large tumble in the latter will definitely see 3-4 basis points of a gap down opening in local yields,” the trader added.
US yields fell on Friday after data showed that the economy added fewer jobs than expected in July, with nonfarm payrolls increasing by 187,000 jobs, below economists’ expectations of 200,000.
The Labor Department’s employment report also showed job gains in May and June were revised lower, potentially suggesting demand for labour was slowing in the wake of the Federal Reserve’s interest rate hikes, which seem to be done for now.
Average hourly earnings, however, surprised on the upside, rising 4.4% from a year earlier, and the unemployment rate edged down to 3.5%.
Local bond yields have been rising recently as longer-duration US yields hit fresh nine-month highs, with the benchmark US 10-year yields crossing the 4.20% mark.
India bond yields may move upwards before debt supply, US peers hurt
The odds of a rate hike in September are just around 14%.
US inflation data is due on Thursday, the same day when the Reserve Bank of India is due to announce its monetary policy decision.
Even as there are no expectations of a change in rates, the market remains concerned that the Indian central bank may turn hawkish amid worries over a jump in inflation in the near term.
India’s retail inflation jumped to 4.81% in June, after easing for four months. Many economists are expecting the July reading to rise to around 6.5%, way above the RBI’s upper tolerance limit.
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