MUMBAI: Indian government bond yields were flat at the start of the week, with the benchmark 10-year yield holding near 6.85%, after the August US payrolls data failed to provide clarity on the size of interest rate cut by the Federal Reserve next week.
The benchmark 10-year yield was at 6.8546% as of 10:00 a.m. IST on Monday, compared with its previous close of 6.8542%.
“The data that was much hyped for at least two weeks has also failed to move the needle, and hence any attempt to break the benchmark yield below 6.85% will be met with selling pressure,” a trader with a state-run bank said.
US Treasury yields fell on Friday, but recouped most of the decline, and moved higher in Asian hours, as traders cut positions.
The two-year yield eased below the 10-year yield, which had dropped to the lowest level in 15 months, but recovered after August jobs data failed to offer a clear signal on the size of an expected rate cut next week.
India bonds not reacting to strong domestic growth, yields little changed
Nonfarm payrolls increased by 142,000 jobs last month after a downwardly revised 89,000 rise in July.
Economists polled by Reuters forecast that payrolls would increase by 160,000 jobs.
The unemployment rate fell to 4.2%, from 4.3% the prior month. Nomura, Capital Economics and Barclays expect the Fed to cut rates by 25 basis points next week.
Even as markets have fully priced a 25 bps move, expectations for a 50-bp reduction remain around 30%.
“Downward revisions to June and July (payrolls data) are negative for the growth outlook, but should also alleviate concerns around negative labour market momentum. Overall, this report appears consistent with 25 bps easing increments,” Nomura said in a note.
The inflation data from the United States and India, due Wednesday and Thursday, respectively, will now be on traders’ radar.
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