MUMBAI: Indian government bonds are expected to be little changed in early deals on Thursday, as positive momentum from lower inflation in India and the United States came under a cloud of rising risks from tariff wars.
The benchmark 10-year yield is likely to move between 6.67% and 6.70%, a trader with a private bank said, compared with its previous close of 6.6821%.
“There could have been an attempt to go past the 6.68% level on the 10-year benchmark, but the reversal in US Treasury yield will see a range-bound opening for local bonds as well,” the trader said.
US yields rose on Wednesday as traders worried about the potential inflationary impact of a global trade war, offsetting optimism over slowing retail inflation in February.
The consumer price index rose 0.2% last month, after rising 0.5% in January, and 2.8% in the 12 months through February.
Economists polled by Reuters had forecast the CPI gaining 0.3% month-on-month and advancing 2.9% year-on-year.
The 10-year US yield has risen above 4.30%, over 15 basis points higher than the lows hit earlier this week.
Bond yields had eased on Wednesday, after India’s retail inflation eased to 3.61% in February, the lowest level since July and also down from 4.26% in January.
A Reuters poll had pegged the reading at 3.98%.
The reading has boosted the chances that the Reserve Bank of India may cut interest rates for the second straight meeting in April.
Indian bond yields to move in tight range before central bank purchase, inflation data
The inflation trajectory is turning more benign than earlier expectations, thereby creating further room for sharper monetary easing, Upasna Bhardwaj, chief economist at Kotak Mahindra Bank said.
“We expect a 25 bps rate cut each in April and June, along with a shift in the stance to ‘accommodative’.
Beyond June, we continue to monitor the downside risks to growth to decipher room for additional rate easing.“
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