MUMBAI: Indian government bond yields are expected to be largely unchanged in early deals on Tuesday as it awaits the direction of the local currency, while US yields remain elevated on dwindling bets of a rate cut in the world’s largest economy.
The 10-year bond yield is likely to move between 6.82% and 6.87%, a trader with a private bank said, compared with its previous close of 6.8500%.
It logged its biggest single-session rise since June 4 on Monday.
“With not much change overnight in Treasury yields, the directional trigger will come from moves in the rupee as it has been volatile and on a declining path over the last few days,” a trader said.
The Indian rupee ended at a fresh record low of 86.5750 and posted its worst single-day decline in over two years on Monday, bogged down by a surge in the US dollar and likely outflows from local equities.
India bond yields rise in lead up to domestic inflation data
The currency is expected to fall further and hit fresh lows on Tuesday.
US Treasury yields remain elevated, with the 10-year yield hovering around its highest level since November 2023 during Asia trade in Tuesday, after US jobs growth unexpectedly accelerated in December and the unemployment rate fell below economists’ predictions.
US yields have been on a tear on concerns that the incoming Donald Trump administration’s policies could reignite inflation, leading to fewer rate cuts.
Investors are currently pricing in only one rate cut in 2025.
All eyes are now on US retail inflation data, due on Wednesday. This follows India’s inflation figures for December, which eased to a four-month low.
Annual retail inflation fell to 5.22% from 5.48% in November, lower than economists’ expectations of 5.30%.
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