MUMBAI: Indian government bond yields fell in early trading on Friday, as US Treasury yields extended losses on bets of a rate cut in September.
India’s benchmark 10-year yield was at 6.9779% as of 10:00 a.m. IST, following its previous close at 6.9872%.
New Delhi aims to raise 340 billion rupees ($4.07 billion) through the sale of bonds, which includes a new seven-year paper, on Friday.
“There could be some continued momentum from yesterday’s trend, where we saw decent buying in the last hour or so, but after the initial moves, the market would focus on auction demand,” the trader said.
India’s bond market sentiment is upbeat as the inclusion of bonds in JPMorgan’s emerging market debt index nears. Gloria Kim, global head of index research at the bank expects inflows into Indian government bonds to be between $20 billion and $25 billion after the inclusion.
Investors await clarity on India’s fiscal consolidation path in the forthcoming government budget before propelling the next leg of rally, Aditya Bagree, head of markets at Citi India said this week.
Meanwhile, Treasury yields slipped on Thursday and stayed lower in Asian hours after data showed the labour market and price pressures were cooling.
India bonds not reacting to strong domestic growth, yields little changed
The 10-year yield hit a more than two-month low.
The latest data after a softer-than-expected retail inflation print have strengthened bets of rate cut from the Federal Reserve.
US producer price index for final demand dropped 0.2% in May after advancing 0.5% in April, and below the 0.1% increase forecast by economists polled by Reuters.
The futures market is pricing in 50 basis points of rate cuts this year, according to the CME FedWatch tool, even though the Fed this week slashed its forecast to only one 25 basis points cut in 2024.
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