MUMBAI: Indian government benchmark bond yield was glued to the 6.85% level on Tuesday amid a lack of strong directional triggers, with market participants eyeing U.S. inflation data for clarity on the size of Federal Reserve’s interest rate cut this month.
The benchmark 10-year yield was at 6.8510% as of 10:00 a.m. IST, compared with its previous close of 6.8546%.
“We can safely say that the benchmark bond has become like the local currency, and no factor has been able to move it either side strongly,” a trader with a private bank said.
U.S. yields were also barely changed, with the 10-year yield holding around the 3.70% mark, as odds of a larger Fed rate cut at the end of its two-day policy meeting on Sept. 18 eased marginally.
The U.S. retail inflation print is due after Indian market hours on Wednesday, and the reading is expected at 2.6% on-year, and at 0.2% on a monthly basis, according to a Reuters poll.
India bond yields flat as traders unclear over Fed rate cut size
Weaker August non-farm payroll data failed to offer a clear signal on the size of an expected rate cut, and even as markets have fully priced in a reduction of at least 25 bps, expectations for a 50 bps move dipped to 27% from 31%.
Meanwhile, India’s retail inflation probably held below the Reserve Bank of India’s 4% medium-term target for a second month in August due to a moderation in food price rises due to last year’s high base, a Reuters poll showed.
The data is due after market hours on Thursday, but even a lower reading may not convince the RBI to change its policy stance immediately.
Seven Indian states will raise 137.90 billion rupees ($1.64 billion) via a sale of bonds later in the day, with the quantum marginally higher than scheduled.
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