MUMBAI: Indian government bond yields moved marginally higher in opening deals on Wednesday as US Treasury yields jumped again, while local sentiment stayed cautious after a spike in inflation delayed rate cut bets to the next year.
The benchmark 10-year bond yield was at 6.8098% as of 10:00 a.m. IST, compared with the previous close of 6.7958% on Tuesday. Indian markets are shut on Friday for a local holiday.
“Benchmark bond yield should remain in the 6.80%-6.82% band for the day,” trader with a private bank said.
US Treasury yields rose on Tuesday, and were elevated in Asian hours on Wednesday, as investors saw President-elect Donald Trump’s policies as inflationary, possibly leading to a slower pace of Federal Reserve rate cuts in 2025.
The 10-year US Treasury yield was around 4.43%, with interest rate futures providing just a 58% probability of a rate cut next month, down from 84% a month ago, according to CME FedWatch tool.
Back home, India’s consumer price inflation accelerated to 6.21% in October, breaching the Reserve Bank of India’s target range of 4% for the first time in 14 months, due to a jump in vegetable prices.
The print, sharply higher than the estimate of 5.81% in a Reuters poll and the 5.49% reading in September, is the last before the monetary policy decision in December and has all but ruled out a rate cut at the meeting.
In light of the higher inflation and hawkish comments from the RBI, Nomura has changed its forecast of the rate cut cycle beginning in December to February.
India bond yields flat, investors await inflation prints
The foreign brokerage however continues to expect 100 bps of cumulative rate cuts in this cycle to a terminal rate of 5.50%, as growth is expected to slowdown.
Focus will now shift to the US retail inflation data, due after Indian market hours later in the day, which will provide key insight into the Fed’s interest rate trajectory.
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