MUMBAI: Indian government bond yields rose further on Monday, with the benchmark yield moving towards the 7.30% mark, mirroring US Treasury yields, which gained after stronger-than-expected economic data trimmed bets of interest rates cuts in the world’s largest economy.
The 10-year benchmark bond yield was at 7.2822% as of 10:00 a.m. IST on Monday, after ending the previous session at 7.2697%.
“Sentiment has slightly tilted in favour of the bears, but inflation prints and the Federal Reserve policy decision hold the key for further moves.
Till then, we may see range-bound trading,“ a trader with a private bank said.
US yields jumped on Friday, with the 10-year yield moving to the 4.25% mark, after data showed that employers added more jobs than expected in November, leading traders to pare back expectations that the Federal Reserve could cut rates soon.
Nonfarm payrolls increased by 199,000 jobs, above economists’ expectations of 180,000 job gains, and after adding 150,000 jobs in October.
The unemployment rate eased to 3.7% from a nearly two-year high of 3.9% in October, alleviating fears that the economy was close to tipping into recession.
The two-year US yield, a closer indicator of interest rate expectations climbed towards 4.75%, with the inversion in the yield curve deepening further to around 50 basis points.
RBI steer on inflation, liquidity key for India bonds
Markets have trimmed bets of a Fed rate cut, with the odds of such an action in March down to 44% from over 60% last week, and for May to 77% from nearly 100% earlier.
The Fed is due to announce its final monetary policy decision for 2023 on Wednesday, wherein no rate action is expected, while markets will eye for the outlook for 2024.
Traders will also react to twin inflation prints that are due before the Fed policy decision.
India and US are due to release November inflation prints on Tuesday.
Back home, traders shrugged off the Reserve Bank of India’s monetary policy decision, announced on Friday, as the central bank avoided any major surprises.
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