MUMBAI: Indian government bond yields are expected to ease marginally in early trading on Tuesday amid strong domestic demand, while US yields continue to slip ahead of the Federal Reserve’s monetary policy decision this week.
The benchmark 10-year yield is likely to move in the 6.90%-6.94% range, compared with its previous close of 6.9184%, which was the lowest level since April 2022, a trader with a private bank said.
“There could be some demand early into the day, as banks would continue to add after the central bank’s proposed liquidity norms, while globally also, everything is supporting the bulls for now,” the trader said.
US Treasury yields slipped as investors awaited the Fed’s policy decision due after Indian market hours on Wednesday, in which the central bank is expected to signal the start of rate cuts from September.
Investors will also pay close attention to Chair Jerome Powell’s remarks, and any dovish tilt could cement bets of 75 basis points reduction in 2024.
Investors have priced in 66 bps of rate cuts till the end of this year, according to the CME FedWatch tool.
Back home, demand from local banks has increased after the Reserve Bank of India released draft guidelines to bolster the liquidity resilience of lenders, which if implemented could lead to more demand for government securities.
India bonds not reacting to strong domestic growth, yields little changed
Meanwhile, the RBI on Monday said new government bonds with a 14-year and 30-year tenor will no longer be accessible to foreign portfolio investors under the fully accessible route.
Market participants also pointed out the decline in oil prices also supports sentiment.
The benchmark Brent crude futures fell below $80 per barrel for first time in seven weeks over concerns about Chinese demand.
India is one of the largest importers of crude oil, and a sustained fall in prices bodes well for the nation’s inflation outlook.
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