MUMBAI: Indian government bond yields are expected to move marginally lower in opening trades on Thursday, with the bulls yet again trying to break below the 6.85% mark on the 10-year benchmark bond yield, after dovish comments from the Federal Reserve.
The benchmark 10-year yield is likely to move between 6.84% and 6.87%, compared to its previous close of 6.8578%, a trader with a primary dealership said.
“The latest developments are further favouring the bulls, but most of it was already factored in,” the trader said.
“Hence, the big challenge of the break of 6.85% may still remain unsolved today, with the market eyeing further commentary from the Fed.”
US Treasury yields fell on Wednesday, with the 10-year yield ending at its lowest level in over a year, after jobs data revision and minutes of the Fed’s July meeting reinforced expectations that the cut cycle will start in September.
US employers added fewer jobs than originally reported in the year through March, underscoring the growing concerns the Fed has about the labour market.
The estimate for total payroll employment from April 2023 to March 2024 was lowered by 818,000.
Indian bond yields inch higher on profit booking, US peers’ rebound
Meanwhile, the Fed appears to be on track for a rate cut in September after a “vast majority” of officials said such an action was likely, according to the minutes of the Fed’s July meeting.
The minutes, released on Wednesday, even showed some members would have been willing to reduce rates in July.
Traders will now eye commentary from Fed Chair Jerome Powell on Friday in Jackson Hole, Wyoming.
The odds of a 50 basis points cut in September marginally improved to 35%, while bets of a 100 bps cut in 2024 have firmed up further, as per the CME FedWatch tool.
Traders will also keep an eye on the minutes of the Reserve Bank of India’s August meeting, due later in the day, at which it held rates and policy stance.
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