MUMBAI: Indian government bond yields are expected to be largely unchanged on Tuesday, in line with their US peers overnight, with investor focus glued to the US presidential election.
The benchmark 10-year bond yield is likely to move between 6.78% and 6.83%, compared with the previous close of 6.7970%, a trader with a private bank said.
“Most traders have already positioned themselves for the big event, and today we are unlikely to se any major moves, and yields should be rangebound with sideway moves,” the trader said.
The US presidential election is later in the day and investors have been putting on trade betting Republican candidate Donald Trump could be president again, although he is still neck and neck with Vice President Kamala Harris in several polls.
Trump’s policies on enacting higher tariffs on imports are likely to stoke inflation and put upward pressure on US yields, and slow down the pace of rate cuts from Federal Reserve.
The biggest shock to Asian economies would come from a victory for Trump, whose proposed plan is to sharply raise import tariffs to improve trade balances, shift manufacturing production to the US, and combat China’s rising global influence, MUFG said in a note.
The 10-year US yield eased on Monday and was around the 4.30% mark in Asian hours, as traders squared up positions ahead of election due in part to a new opinion poll showing Harris with a surprise lead in lowa, a state that Trump easily won in 2016 and 2020.
India bond yields to trend higher as US peers spike
The elections would be followed by the Fed’s policy decision due on Thursday, wherein a 25-basis-point rate cut is priced in by the market, and guidance would be crucial.
Back home, traders will eye sale of debt from states, which aim to raise 94.67 billion rupees ($1.13 billion), with the quantum being lower than schedule for third straight auction.
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