MUMBAI: Indian government bond yields are expected to trend marginally lower in opening trades on Thursday, tracking a further downward move in US yields, even as focus remains on the supply and minutes of the local central bank’s latest meeting.
The 10-year benchmark bond yield is expected to move in the 7.14%-7.18% range, after closing at 7.1679% in the previous session, a trader with a private bank said.
“There could be some bullish bias at the open as US yields are seeing new lows, but any major rally is unlikely, and the benchmark bond yield should remain around the 7.15% mark,” the trader said.
US yields eased more, with the 10-year easing to 3.85% levels in Asian hours, its lowest level in nearly five months amid a rise in risk aversion.
Bets of an early policy pivot from the Federal Reserve continued to aid.
US yields have plunged in the last few weeks, with the 10-year yield easing by nearly 120 basis points (bps) on rising bets that the Fed will deliver rate cuts from as early as March.
Markets now expect a 77% probability of the Fed cutting rates in March and nearly a 100% probability of an action in May.
India bond yields seen little changed before state debt sale
The Fed has projected three rate cuts in 2024, but the market is pricing in five rate cuts of 25 bps each. Back home, traders will await a fresh supply of debt as New Delhi aims to raise 300 billion rupees ($3.61 billion) through the sale of bonds on Friday.
The minutes of the Reserve Bank of India’s December meeting are also due on Friday and focus will remain on the thinking of central bank members about the interest rate trajectory in 2024.
The RBI’s objective of aligning inflation with its 4% target on a durable basis is far from assured and a failure to do so could risk economic growth, it said in its latest bulletin published on Wednesday.
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