MUMBAI: Indian government bond yields eased in opening trades on Thursday, tracking US Treasury yields after the Federal Reserve maintained its outlook for three rates cuts this year.
The benchmark 10-year yield was at 7.0715% as of 10:00 a.m. IST, following its previous close of 7.0918%.
“The move in local bond yields is in line with what was expected, and we may now see some consolidation around 7.05% level for the benchmark,” a trader with a primary dealership said.
Traders said that profit booking from state-run banks will cap the fall in yields.
US bond yields eased on Wednesday, led by a fall in the two-year yield, while the 10-year yield moved only slightly lower and stayed above 4.25%, as the Fed reduced its rate cut projection for 2025 to three cuts from four earlier.
Federal Reserve Chair Jerome Powell’s outlook for price pressures was steady even after the unexpected strength in recent inflation data. Powell said the timing of rate cuts in 2024 will depend on more certainty over inflation declining towards the 2% target.
Indian bond yields seen steady as traders await Fed decision
The recent rise has not really changed the overall story of inflation moving down gradually on a “somewhat bumpy road”, he said. The odds of a cut in June have risen to 75% from 59% before the Fed decision, according to the CME FedWatch tool.
In India, traders brace for a second state bond sale this week, as two of them aim to raise 240 billion rupees ($2.9 billion) later in the day.
States had sold a record 502 billion rupees of bonds on Tuesday.
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