MUMBAI: Indian government bond yields may ease in opening trade on Monday, tracking US peers, amid lack of fresh directional cues.
The benchmark 10-year yield is likely to move between 6.85% and 6.89%, compared to its previous close of 6.8700%, a trader with a primary dealership said.
“Market has scaled back expectations of an aggressive easing by Federal Reserve so unless another set of data suggests otherwise, we may see rangebound movement in both US and local bond yields in near term,” the trader added.
US Treasury yields eased on Friday, partly reversing the previous day’s big gains as investors digested data showing a resilient US consumer and inflation trending lower, leaving the Fed ample scope for a small interest rate cut next month.
A healthy US retail sales data and a smaller-than-expected rise in weekly unemployment claims on the heels of benign inflation readings restored confidence in the economic picture last week.
Consequently, interest rate futures traders scaled back bets that the Fed would need to cut 50 basis points when it next meets in September.
India bonds not reacting to strong domestic growth, yields little changed
They now see a 74% chance of a 25 bps ease in the policy rate.
Traders will, however, watch out for minutes from the latest policy meetings of Fed and Reserve Bank of India (RBI), due later in the week.
The RBI kept its key rate unchanged earlier this month, while maintaining its focus on bringing down inflation.
“We expect RBI to lag the Fed with respect to timing of rate cuts and domestic monetary policy will be more attuned to the trajectory of domestic inflation.
We expect RBI to have some space for a shallow rate cut in Q4 FY25,“ said Prashant Pimple, fixed income CIO at Baroda BNP Paribas Mutual Fund.
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