MUMBAI: Indian government bond yields edged higher in the early session on Tuesday, mirroring US peers, which hit their highest in nearly 16 years.
The benchmark 7.26% 2033 bond yield was at 7.2340%, as of 10:00 a.m. IST, after ending the previous session at 7.2208%, a trader with a primary dealership said.
“As expected, our bonds are not reacting in the exact manner in which US yields have risen, but still the bias would be towards offers for today,” a trader with a private bank said.
The yield on the 10-year Treasury note hit levels last seen in the financial crisis of 2007 amid rising concerns that the Federal Reserve will keep interest rates higher for longer in a resilient economy.
The 10-year yield hit 4.3660% in Asian trading hours on Tuesday, the highest since November 2007, and is up over 40 basis points (bps) in August.
The rate-sensitive two-year yield crossed the 5% mark. Even as the odds of another 25-bp rate hike by the Fed remain at around 15%, traders are pushing back hopes of a rate cut.
Fed funds futures traders are pricing in less than 100 bps of rate cuts in 2024, down from around 140 bps a few weeks earlier. The US central bank has raised rates by 525 bps since March 2022 to the 5.25-5.50% range.
India bond yields seen rising on elevated US peers
Meanwhile, traders also attribute the muted reaction in local bonds to lower-than-scheduled supply of state debt in the last few weeks.
Indian states aim to raise 84.30 billion rupees ($1.01 billion) via a sale of bonds later in the day, less than half of the scheduled calendar.
Investors would also keep an eye on the evolving consumer price increases after July retail inflation spiked to a 15-month high of 7.44%, up from the previous month’s 4.87%.
However, most do not expect this to transpire into a rate action by the Reserve Bank of India.
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