MUMBAI: Indian government bond yields were flat in early session on Thursday, with traders eyeing crucial US inflation data due later in the day to gauge the Federal Reserve’s interest rate trajectory.

The benchmark 10-year yield was at 6.9782% as of 10:00 a.m. IST after having closed at 6.9754% in the previous session.

“Bond prices are again consolidating after mild rally yesterday, and there are chances that foreign banks may front-run the US data on expectations of lower-than-expected reading,” a trader with a private bank said.

US inflation likely rose 0.1% month-on-month, while consumer prices for 12 months to June are expected to have risen 3.1%, a Reuters poll showed.

On Wednesday, the Federal Reserve Chair Jerome Powell said he was not yet ready to declare victory over inflation but felt that the economy is on a stable path to steady prices and continued low unemployment rates.

In his two-day address to Congress, Powell avoided providing any major guidance on the timing of interest rate cuts in the world’s largest economy, which led the 10-year US yield to consolidate around the 4.30% handle.

The probability of a 25-basis point rate cut in September stayed around 75%, while expectations of 50 bps cuts in 2024 remained intact, according to the CME FedWatch Tool.

India bonds not reacting to strong domestic growth, yields little changed

After the US data attention will turn to India’s consumer inflation print and fresh debt supply at the weekly auction, both due Friday.

A Reuters poll predicted the retail inflation to edge up in June, snapping five months of declines, largely because of a jump in vegetable prices.

The poll forecasts a 4.80% year-on-year rise in retail inflation, up from 4.75% in May.

STCI Primary Dealer said rainfall activity needs to be watched to assess its impact on food prices and spillovers from unseasonal rains and heat waves could put pressure on prices of vegetables and fruits.


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