MUMBAI: Indian government bond yields are likely to be little changed in early deals on Thursday as market participants continue to await fresh triggers, while volumes remain shallow ahead of the calendar year-end.
The 10-year yield is likely to move between 6.76% and 6.79%, a trader with a private bank said, compared with its previous close of 6.7753%.
There are no direct triggers for bonds per se, the trader said, adding that until then, movement in the US yield “is crucial”.
“Any major fall in the local currency could also push the benchmark bond yield to fresh high levels,” they added.
US Treasury yields stayed elevated, with the 10-year yield around its highest level in nearly seven months amid debt supply and on concerns over interest rate cuts in 2025.
Underlying sentiment in the world’s largest economy remained cautious, after the Federal Reserve downsized its 2025 interest rate cut forecast to 50 basis points last week.
The odds of a pause in January stood at 91%, according to CME’s FedWatch Tool.
Domestically, traders await fresh supply of debt in a holiday-truncated week, as New Delhi is set to raise 320 billion rupees ($3.76 billion) through debt sale on Friday.
The Reserve Bank of India, in its monthly bulletin released on Tuesday, said growth trajectory is expected to pick up in the second half of 2024-25 driven by domestic private consumption and a sustained revival in rural demand.
India’s economic growth rate fell unexpectedly to 5.4% in the July-September quarter, its slowest pace in seven quarters, while inflation in November came in well over the RBI’s medium-term target of 4%.
India bond yields rise in lead up to domestic inflation data
In the minutes of its December meeting, the members of the rate setting panel cited high prices as the cause for demand slowdown in India and said, aligning inflation to the 4% target is key to ensuring sustained economic growth.
The RBI kept its key interest rate unchanged, but cut banks’ cash reserve ratio to improve liquidity.
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