MUMBAI: Indian government bond yields are likely to trend lower in early trading on Wednesday as US yields and oil prices eased further, which may boost investor sentiment.
The 10-year benchmark bond yield is expected to be between 7.23% and 7.28%, after ending the previous session at 7.2571%, a trader with a state-run bank said.
“There could be some buying as the 10-year US yield has broken the crucial 4.20% handle, but the major point of focus would be for how long would it sustain at these levels,” the trader said.
“Even concerns from oil prices seem to be nearly over.”
US yields tumbled on Tuesday on concerns about slowing US economic growth after a report showed job openings hit a more than a 2-1/2-year low in October, reaffirming expectations of a policy pivot in 2024.
The Job Openings and Labor Turnover Survey, or JOLTS report also showed that there were 1.34 vacancies for every unemployed person in October, the lowest since August 2021 and down from 1.47 in September.
This, along with softer inflation reading, boosted hopes that higher interest rates were dampening demand for workers, and that the Federal Reserve’s policy tightening cycle was over.
The 10-year yield dropped to 4.16%, for the first time in over three months, and remained below 4.20% in Asian hours on Wednesday, with odds of a rate cut in March close to 63%.
Oil prices also eased as markets continue to doubt the impact of supply cuts from OPEC+ and take cues from a worsening demand outlook in China.
Still, major focus would remain on the Reserve Bank of India’s monetary policy decision due on Friday, where the central bank is expected to hold rates at 6.50% for a fifth consecutive meeting, according to a Reuters poll.