MUMBAI: Indian government bond yields eased marginally after opening largely unchanged in the early session on Monday, as traders resumed adding long positions after no fresh upmoves in US peers despite slightly hawkish commentary from the Federal Reserve Chair.
The benchmark 7.26% 2033 bond yield was trading at 7.1762% as of 10:00 a.m. IST after ending the previous session at 7.2035%.
“Since US yields have not reacted much to the speech, there is no chance that Indian bond yields could react, and also since the major event is behind us, traders are again building fresh positions,” a trader with a private bank said.
The Indian benchmark bond yield eased marginally last week, recording its first dip, following four straight weeks of gains, as yields have shown a strong upside resistance.
US yields stayed elevated, with the 10-year yield remaining around the crucial 4.25% mark, after Fed Chair Jerome Powell said on Friday that the central bank may need to raise interest rates further to cool still-high inflation.
“We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” he said.
The two-year bond yield, which is more reactive to rate expectations was at 5.08%. Even though the odds of another Fed rate hike in September have continued to remain around 20%, the bets for rate cuts are getting pushed back.
Indian bond yields marginally higher as traders eye debt auction
The Fed has raised rates by 525 basis points since March 2022. Back home, traders will keep an eye on the domestic inflation trajectory as well as evolving liquidity conditions, which will act as major cues.
India’s retail inflation spiked to a 15-month high of 7.44% in July from 4.87% in June.
Meanwhile, US jobs data, India’s economic growth data for April-June and the weekly debt auction will act as major triggers for the week.
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