MUMBAI: Indian government bond yields are expected to be largely unchanged early on Thursday, as investors await the Reserve Bank of India’s first monetary policy decision of this fiscal year, while US Treasury yields also remained flattish.
The yield on the benchmark 10-year is likely to trade in a 7.08%-7.12% range, following its close of 7.1030%, a trader with a private bank said.
“With the 10-year US yield consolidating around 4.35%, we are unlikely to see any major moves in local bonds. The major bone of contention will now be the commentary and guidance from the central bank,” the trader added.
The RBI’s policy decision is due on Friday, and no action on rates is expected for a seventh consecutive time, while the major focus would be on comments on inflation and liquidity, traders said.
Strong economic growth and moderating inflation mean the central bank will have room to keep interest rates on hold likely until July, economists say.
At the previous meeting, RBI Governor Shaktikanta Das had stressed that they may consider rate cuts only once retail inflation eases towards the 4% target on a sustainable basis.
US bond yields stayed elevated as recent strong economic data has led to concerns over the timing and quantum of rate cuts by the Federal Reserve in 2024, even as the central bank has reiterated three cuts in its latest policy decision.
Relentless spike in US yields turns India bond traders more cautious
The 10-year US yield was around 4.35% handle, which is a key technical level.
Investors were also cautious, with the RBI moving to multiple price-based central government debt auctions after nearly three years, as the government’s borrowing cycle starts on Friday.
New Delhi aims to raise 380 billion rupees ($4.55 billion), and the auction includes 200 billion rupees of a new 10-year bond, which will soon replace the existing benchmark paper.
The government aims to borrow 7.50 trillion rupees through bond sales during April-September, 53% of its annual borrowing target.
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