MUMBAI: Indian government bond yields rose on Friday, hurt by elevated US yields and with the local benchmark bond yield at a point where a slight uptick could trigger a sell-off depending on demand at the weekly debt auction.
The benchmark 10-year yield was at 6.7500% as of 10:00 a.m. IST, compared with its previous close of 6.7396%.
Later in the day, New Delhi aims to raise 370 billion rupees ($4.36 billion) through the sale of bonds, including 220 billion rupees of the benchmark bond.
“Ideally 6.75% is a strong resistance zone and should not be broken today. But a comfortable break will open the door for par levels of 6.79%,” a trader with a state-run bank said.
US yields remain elevated, with the 10-year yield staying near a three-week high and comfortably above the 4.30% mark in Asia hours, on concerns about the Federal Reserve’s rate easing cycle in 2025.
The rise comes after US November inflation data was in line with estimates, cementing bets of a Fed rate cut next week but clouding the outlook for next year.
Though the central bank is poised to cut rates on Wednesday, traders fear it may use a hawkish tone, indicating a pause at least for the early part of 2025.
India bond yields rise in lead up to domestic inflation data
Meanwhile, India’s retail inflation eased to 5.48% in November from a 14-month high of 6.21% in October.
The data gathers more prominence in the wake of expectations that the appointment of a new Reserve Bank of India governor will mean a looser monetary policy stance.
“We maintain our call for a 25 bps cut at the February meeting, with cumulative 75 bps cuts in this cycle, keeping an eye on the US dollar and dollar liquidity,” DBS said in a note.
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