MUMBAI: Indian government bond yields rose on Thursday, tracking a rally in U.S. rates, while awaiting data that will help traders gauge when the Indian central bank will cut rates.
The benchmark 10-year yield was at 6.7311% at 11:08 a.m. IST, compared to 6.7171% in the previous session. The U.S. yield on the same maturity climbed to 4.29%, the highest in two weeks.
Data due later in the day, during market hours, is expected to show that India’s retail inflation likely fell to 5.53% in November after breaching the central bank’s 6% upper tolerance ceiling, per a Reuters poll.
The data gather more prominence in wake of expectations that the appointment of a new Reserve Bank of India (RBI) head will mean a more accommodative policy stance.
The central bank is now expected to cut rates at its next policy meeting in February, sooner than was previously expected.
The trajectory of inflation will play a key role for how much room RBI has on the rate front. Economists expect inflation to soften hereon and possibly dip below 5% by March.
India bond yields trapped in narrow range before inflation data
The market “has very little appetite” for any upward inflation surprises, a fixed income trader at a bank said. The 10-year U.S. yield rose on Wednesday and inched up in Asia trade despite U.S. November inflation data cementing a Federal Reserve rate cut next week.
Morgan Stanley pointed out in a note that the inflation data “had some strong components signalling sticky inflation”.
“Moreover, the data did not give much clarity on monetary policy expectations beyond the upcoming December meeting,” it said.
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