MUMBAI: Indian government bond yields were largely unchanged in the early session on Wednesday, unaffected by the uptick in their US counterparts after hotter-than-expected inflation data in the world’s largest economy.
The benchmark 10-year yield was at 7.0306% at 10:05 a.m. IST, following its previous close of 7.0274%.
“There is demand for local debt from foreign investors, which probably explains the muted reaction to US inflation data at the open,” a trader with a private bank said.
“We don’t anticipate a break of the 7.00%-7.05% range on the benchmark yield for some time now unless there is a fresh trigger.”
Data released on Monday showed the US consumer price index increased in February, topping analyst forecasts and indicating price pressures may be sticky.
Although the CPI rose 0.4% in February, in line with forecasts, the 3.2% year-on-year gain came in just ahead of an expected 3.1% increase.
Core inflation also topped estimates. Following the data, investors further reduced the possibility of a rate cut by the Federal Reserve in May.
The Fed’s policy decision is due next week and investors will assess the outlook for rate cuts in the central bank’s updated dot plot.
Heavy debt sale, profit booking break India bond yields’ declining trend
The 10-year US Treasury yield rose almost 6 basis points (bps) on Tuesday, while the two-year yield jumped around 7 bps.
Locally, India’s retail inflation for February was at 5.09% in February, slightly higher than analysts’ expectations, but largely unchanged from the 5.1% reading in January.
The inflation print is likely to have no implications for India’s monetary policy when it meets next month, economists said. India aims to raise 340 billion rupees by issuing Treasury Bills on Wednesday.
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