MUMBAI: Indian government bond yields continue to move sideways on Wednesday on consolidation after the recent fall and as traders eye more directional cues for further moves.
The 10-year benchmark bond yield was at 7.1726% as of 10:00 a.m. IST, after closing at 7.1744% in the previous session.
“At the fag end of the year, traders do not want to be overly active, and after the recent correction in yields, they are eyeing strong triggers for further downward push,” a trader with a state-run bank said.
Bond yields have fallen in the last few days, tracking a plunge in US Treasury yields on bets of a policy pivot from the Federal Reserve.
The 10-year US yield remained around 3.90% in Asian hours on rising expectations of cuts after the Fed’s dovish commentary projected three rate cuts in 2024.
However, the two-year yield was slightly higher, with the inversion with the 10-year yield at more than 50 basis points (bps), after Fed members pushed back against expectations for rate cuts in March.
Markets now expect a 76% probability of rate cuts in March and a more than 97% probability in May. Even though the dot plot shows 75 bps of cuts in 2024, markets are pricing in 125 bps of rate action from the Fed.
India bond yields edge up on profit booking; market eyes fresh cues
Increasing possibilities of Fed rate cuts have also led to speculations of a similar move by the Reserve Bank of India (RBI), even as it maintained a cautious tone in its policy decision earlier this month.
The minutes of the RBI policy meeting are due on Friday, and the focus will remain on the central bank members’ thought process about the interest rate trajectory in 2024.
Traders await a fresh supply of debt as New Delhi is to raise 300 billion rupees ($3.61 billion) through the sale of bonds.
The RBI will auction Treasury bills worth 240 billion rupees later in the day.
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