MUMBAI: Indian government bond yields rose in early trades on Friday, as US Treasury yields continued their reversal after strong economic data reduced the likelihood of aggressive rate cuts by the Federal Reserve.
Bond traders were also cautious before a fresh supply of debt.
India’s 10-year benchmark bond yield was at 7.2275% as of 10:00 a.m. IST, against its previous close at 7.2208%.
“Local supply pressure was already testing investor appetite at the start of the week, and with the 10-year US yields back to 4% now, there is hardly any supportive factor,” a trader with a private bank said.
“If the demand at the auction is weak today, we could see a test of 7.25% on the benchmark.”
US bond yields rose on Thursday, with the 10-year yield crossing the crucial 4% handle, after data showed US labour market remained strong, tempering expectations of an interest rate cut by the Fed in March.
The number of Americans filing initial claims for unemployment benefits fell to 202,000 last week, below estimates of 216,000, while private payrolls increased by 164,000 jobs in December, the largest monthly increase since August.
The odds of a pause by the Fed in March stand at 35%, up from around 10% last week, according to the CME FedWatch tool.
The odds of 150 basis points of rate cuts in 2024 have dropped to 54%, down from 79% last week.
Flattish trend persists in India bond yields, traders eye Treasury move
Investors now await US December non-farm payroll data due after Indian market hours.
Meanwhile, New Delhi will sell 340 billion rupees ($4.09 billion) of bonds later on Friday.
Traders are concerned about heavy debt sales in this quarter, as states aim to raise 4.13 trillion rupees, while the federal government plans to raise 2.37 trillion rupees through bonds.
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