MUMBAI: Indian government bond yields are expected to trend lower on Monday following weaker-than-expected economic growth data, while market participants await the central bank’s monetary policy decision later this week.
The benchmark 10-year yield is likely to move between 6.72% and 6.76%, compared with its previous close of 6.7416%, a trader with a private bank said.
“Sentiment for bonds has changed drastically after the weak growth reading, and we could see buying momentum continue today and push yields further down in initial trades,” the trader said.
Bond yields had dropped on Friday after data showed India’s economic growth slowed much more than expected in the third quarter, hampered by weaker expansions in manufacturing and consumption, likely adding pressure on the Reserve Bank of India for rate cuts.
Gross domestic output in the world’s fifth-biggest economy rose by 5.4% in July-September year-on-year, data showed on Friday, the slowest pace in seven quarters and below a Reuters poll of 6.5%.
In the previous quarter it grew 6.7%.
Following the data, Citi cut its growth forecast for the ongoing financial year ending March 2025 to 6.4% from 7%, while the RBI’s forecast is at 7.2%. Indian economy grew by 8.2% in the previous fiscal year.
“While elevated inflation makes a December rate cut unlikely, the RBI could explicitly acknowledge need to support growth, cementing a Feb rate cut view,” Citi said in a note.
India bond yields to trend higher as US peers spike
The RBI’s policy decision is due on Friday.
Meanwhile, the 10-year US Treasury yield hovered around 4.20% as inflation concerns eased, which boosted bets of a rate cut by the Federal Reserve later this month.
Investors have pencilled in a 66% chance that the Fed will cut rates in December, compared to 53% in the previous week.
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