MUMBAI: The movement in Indian government bond yields was curtailed in early deals on Wednesday, as market participants await inflation data for the world’s largest economy as well as locally for further cues on interest rates.
The benchmark 10-year yield was at 6.7161% as of 10:00 a.m. IST, compared with its previous close of 6.7073%.
“Even though a rate cut from the Federal Reserve next week is largely expected, if the inflation print is above estimates, it could derail the rate-cut trajectory for 2025 and hence, the data is very crucial,” a trader with a private bank said.
U.S. consumer price index (CPI) data is due after Indian market hours and a Reuters poll projects inflation to have risen 2.7% year-on-year and 0.3% month-on-month in November.
The 10-year U.S. yield rose overnight and was around 4.23% in Asia hours.
The odds of a 25 basis point U.S. rate cut are currently at 85%, compared to 72% last week. The Fed, whose policy decision is due next Wednesday, has already cut rates by 75 bps since September.
Indian bond yields seen down as Fed rate cut bets, new central bank head to aid sentiment
India’s CPI data is due on Thursday, with a Reuters poll predicting retail inflation likely slowed to 5.53% in November from 6.21% in October as the arrival of fresh produce to markets moderated soaring vegetable prices.
Market sentiment was supported as bets that the Reserve Bank of India will cut rates rose after India appointed Sanjay Malhotra as its new central bank governor, effective Wednesday.
Most brokerages now anticipate the RBI will start its monetary policy easing cycle with a 25 bps rate cut in February.
Meanwhile, New Delhi will raise 370 billion rupees ($4.36 billion) through bond sales, including 220 billion rupees of the benchmark paper, on Friday. The RBI will also auction treasury bills worth 190 billion rupees later in the day.
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