MUMBAI: Indian government bond yields may edge lower in early trading on Thursday as oil prices as well as US Treasury yields have come off recent highs, calming investors’ nerves.
The yield on the benchmark 10-year bond is likely to trend in a 7.16%-7.21% range following its previous close at 7.1860%, a trader with a primary dealership said.
“There may be some respite today from the selling pressure seen earlier in the week, and we could see some reversal in yields.
Still, since yields had not risen sharply, we can safely rule out any major downward correction,“ the trader said.
US yields came off their recent highs, slowing a week-long selloff that had pushed benchmark 10-year yield to their highest levels in five months, as investors pared down expectations over timing and quantum of rate cuts in 2024.
Recent commentary as well as data has led to strong expectations of a delayed onset to the US rate easing cycle.
Futures markets are now pricing the possibility of a less than 50 basis points (bps) of rate cuts by end of this year, sharply lower than over 150 bps, which was a widespread expectation at the start of the year, according to CME’s FedWatch Tool.
Relentless spike in US yields turns India bond traders more cautious
Meanwhile, oil prices eased, with the benchmark Brent crude moving below the critical $90 per barrel mark, pressured by a rise in US commercial inventories, and weaker Chinese economic data.
Oil prices had risen earlier amid worries over conflict in the Middle East that could impact supply.
Higher commodity prices impact India’s retail inflation and may make the journey towards the Reserve Bank of India’s 4% target more difficult.
New Delhi will sell 240 billion rupees ($2.87 billion) of bonds, including a new 40-year note, on Friday.
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