MUMBAI: Indian government bond yields trended down on Wednesday, tracking a fall in US Treasury yields on rising prospects of a deeper interest rate cut next month, while the 10-year Indian benchmark bond yield saw strong support around 6.85%.
The benchmark 10-year yield was at 6.8504% as of 10:00 a.m. IST, compared to its previous close of 6.8561%.
“For the benchmark to break 6.85%, we need a much larger trigger.
A marginal fall in US yields will not be enough for this level to be breached,“ a trader with a private bank said.
US Treasury yields fell on Tuesday as investors braced for the minutes of the Federal Reserve’s latest monetary policy meeting, due later in the day, and Chair Jerome Powell’s remarks on Friday in Jackson Hole, Wyoming.
The 10-year US yield eased to 3.80%, its lowest level in two months, as the odds of a 50-basis-point cut by the Fed in September have risen to 33%, after traders had completely ruled out such a move on Tuesday.
The market now expects the Fed to cut the rate by 100 bps in 2024, up from around 90 bps earlier in the week.
The Fed held interest rates steady in July.
Investors’ focus will also remain on the minutes of the Reserve Bank of India’s August meeting, at which it held rates and policy stance, which would be released after market hours on Thursday.
While most central banks are poised to ease policy rates, the RBI is focussed on taming food price-led inflation.
India bond yields may ease tracking US peers; fresh cues eyed
India’s retail inflation fell to a near five-year low of 3.54% in July due to a base effect, suggesting the slower pace is temporary.
New Delhi will sell bonds worth 230 billion rupees ($2.74 billion) on Friday, while the central bank will auction treasury bills worth 200 billion rupees later in the day.
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