MUMBAI: Indian government bond yields are expected to be largely unchanged in early trading on Wednesday, as market participants eye stronger triggers for direction from the current levels.
India’s benchmark 10-year yield is likely to move in a 6.95%-6.99% range, following its previous close of 6.9789%, a trader with a state-run bank said.
“Fundamentally, there are no strong cues on either side for bonds to react in a strong manner, and hence we may see benchmark yield consolidating below 7%, and move in a very tight range,” the trader added.
US yields eased on Tuesday after data showed retail sales in the world’s largest economy grew less than expected in May, reinforcing expectations that the Federal Reserve is likely to start lowering interest rates this year.
Philadelphia Fed President Patrick Harker expects only one rate cut in 2024, as he sees slowing but above-trend economic growth, a modest rise in the unemployment rate, and a “long glide” back to target for inflation as his base case.
The futures market is pricing in nearly two rate cuts of 25 bps each in 2024, even as the Fed slashed its forecast to only one cut of 25 bps this year, down from three projected in March, according to the CME FedWatch tool.
In India, minutes from the central bank’s latest policy meeting are due on Friday.
Two external members had voted for a change in stance as well as a rate cut, even as the authority maintained the status quo on both earlier this month.
Flat Indian bond yields eye fresh directional triggers
India should avoid “adventurism” and continue to focus on bringing down inflation towards the target of 4% despite the growing clamour to signal a pivot in monetary policy, Reserve Bank of India Governor Shaktikanta Das said on Tuesday.
Market participants will also remain focused on foreign inflows into bonds, ahead of their inclusion in JPMorgan’s emerging market debt index.
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