MUMBAI: Indian government bond yields eased in the early session on Friday as US Treasury yields consolidated, with traders not eyeing any major near-term spike and focus shifting back to the central government’s last debt auction for this financial year.
India’s benchmark 10-year yield was at 7.0760% as of 10:00 a.m. IST, following its previous close of 7.0883%.
New Delhi aims to raise 300 billion rupees ($3.61 billion) through a sale of bonds later in the day, which includes an offering of a liquid 14-year bond.
“For now, it seems Treasury yields may not jump with the 10-year yield in the 4.20%-4.30% zone, which is giving some confidence to traders as the central government’s debt auction cycle for the year is coming to an end,” a trader with a primary dealership said.
US yields consolidated, after a sharp spike earlier in the week, as data showed a 0.8% drop in retail sales last month, exceeding the 0.1% decline estimated by economists in a Reuters poll.
The 10-year US yield was around 4.25%, after hitting 4.33% earlier in the week, as bets of rate cuts in the world’s largest economy get pushed back.
India bond yields seen rising as US peers jump after inflation uptick
The odds of a rate cut by the US Federal Reserve in May have gone down to 34%, down from 60% last week. The bets for a 50-bps rate cut until May had stood at 83% a month ago, according to the CME FedWatch tool.
Indian debt market participants have also pushed their expectations for the start of rate cuts, as indicated by the overnight index swap curve following the hawkish tone of the latest monetary policy statement.
Last week, the Reserve Bank of India left interest rates unchanged and reiterated its commitment to meeting the 4% inflation target on a sustainable basis.
Traders also remained cautious, with the benchmark Brent crude oil contract remaining above the $80-per-barrel mark as a rise may impact local inflation readings.
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