MUMBAI: Indian government bond yields were lower in early session on Wednesday as traders added positions after yields showed strong upper resistance, even as they awaited key market-moving triggers later in the week.
The benchmark 7.26% 2033 bond yield was at 7.2078% as of 10:00 a.m. IST, after ending the previous session at 7.2204%.
The benchmark bond yield has eased six basis points (bps) after hitting over a four-month high of 7.26% last Thursday.
“After the strong resistance at par levels, some positivity is getting built in. And with vegetable prices easing, things may be not as bad as feared on the inflation front which is favouring the bulls this week,” a trader with a private bank said.
Meanwhile, US yields remained elevated, with the 10-year yield hovering around 16-year high levels on rising bets that interest rates will remain elevated for longer.
Even as the odds of another 25-bps rate hike by the Federal Reserve remained at around 15%, traders continuously pushed back rate cut hopes.
India bond yields seen rising on elevated US peers
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.
Fed Chair Jerome Powell’s speech at the Jackson Hole conference on Friday would provide more clues on the central bank’s thinking on the rate trajectory.
The Reserve Bank of India will release the minutes of its latest monetary policy meeting after market hours on Thursday.
The RBI had maintained a status quo on policy rates in the meeting but raised inflation forecast for the quarter as well as the year.
Retail inflation spiked to a 15-month high of 7.44% in July, up from the previous month’s 4.87%, but traders said recent government actions and a dip in vegetable prices would ensure inflation does not stay higher for a longer period.
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