MUMBAI: Indian government bond yields are expected to open marginally lower on Thursday, as US Treasury yields declined further after labour market data bolstered the case for a larger rate cut from the Federal Reserve later in the month.
The benchmark 10-year yield is likely to move between 6.84% and 6.87%, compared with its previous close of 6.8579%, a trader with a private bank said.
“Though there is not much juice left in the benchmark bond yield, as any major move below 6.85% is unlikely to be seen, we could see bulls becoming active again today,” the trader said.
US Treasury yields fell on Wednesday, with interest rate sensitive two-year yields hitting a 15-month low, after data showed US job openings dropped to over three-year low in July.
The closely watched yield curve between two-year and 10-year notes also briefly turned positive for the second time in a month indicating widening expectations of interest rate cuts.
The data comes after weaker manufacturing print and ahead of the crucial US non-farm payrolls data due on Friday, which most believe would be the final trigger to move the needle in favour of a 25 or 50-basis-point move.
Markets are fully pricing in a rate cut of at least 25 bps at the Fed’s meeting this month, with expectations for a 50 bps cut rising to 45% from 30% earlier this week.
Indian bond yields seen slightly lower but major focus on US data
Back home, New Delhi will sell bonds worth 290 billion rupees ($3.45 billion) on Friday, which includes liquid 15-year note.
ICICI Prudential Life Insurance plans to raise investments in longer-duration federal government bonds, including the 10-year benchmark, as the demand-supply outlook is “quite favourable”, Ketan Parikh, head of fixed income investments said on Wednesday.
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