MUMBAI: Indian government bond yields continued to move sideways in early trading on Tuesday, with traders eyeing major triggers and awaiting a fresh supply of debt via states, while US yields reversed some of their recent declines.
The benchmark 10-year yield was at 7.0571% as of 10:00 a.m. IST, following its previous close of 7.0601%.
“Till the time benchmark bond yield does not break 7.05% bottom and 7.08% top, there would be lacklustre trading interest, and we do not expect a break on either side this week,” the trader said.
Eleven states aim to raise 279.81 billion rupees ($3.37 billion) through the sale of bonds later in the day.
Not only is the quantum at the lowest level in the last three weeks, it also undershoots the calendar by over 100 billion rupees. Including this sale, states will have borrowed 555 billion rupees below schedule since February.
This has pushed the spread with the central government counterpart lower, after briefly widening at the start of this quarter.
Meanwhile, US yields rose on Monday, with the 10-year yield ending above the critical 4.20% mark ahead of a busy week that includes testimony by Federal Reserve Chair Jerome Powell and US February jobs data, likely increasing volatility.
India bond yields dip as US Treasury move triggers bullishness
Traders are focused on when the Fed will begin its interest rate easing cycle as growth, though strong, continues to show some signs of weakening, while inflation remains above the Fed’s 2% annual target.
The odds for a rate cut in May have eased to 21% from 26% in the previous day, according to the CME FedWatch tool.
Back home, traders await key inflation data next week, with bets of the Reserve Bank of India cutting interest rates pushed to the third quarter of fiscal 2025 as it aims to meet its 4% inflation target on a sustainable basis.
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