MUMBAI: Indian government bond yields are expected to trade sideways in early deals on Thursday, as traders will likely stay in wait-and-watch mode regarding India-Pakistan tensions.
The benchmark 10-year yield will likely sway between 6.32% and 6.36%, a trader at a private bank said, after closing at 6.3367% in the previous session.
“Markets may open steady as there was no significant escalation to the India-Pakistan conflict,” a trader at a state-run bank said.
Traders will closely scour the news for any retaliations from Pakistan after India struck nine locations across the South Asian neighbour’s territory and Pakistan Kashmir.
Meanwhile, US Treasury yields extended their fall in the previous session after Federal Reserve Chair Jerome Powell flagged a high risk of inflation and unemployment.
The Fed kept the key policy rate unchanged amid tariff uncertainty, which matched trader expectations.
“The FOMC decision was no surprise, so there won’t be much impact on the Indian bond yields,” the trader added. While border tensions have caused jitters in the markets, the overall sentiment is still strong as traders expect that a full-fledged escalation is unlikely.
Indian bond yields likely to rise after India strikes Pakistan
The India-Pakistan conflict may have hurt India’s appeal for foreign investors as a safe haven, but the impact is not very significant, analysts and investors said.
Rates
India’s overnight index swap rates are expected to be largely unchanged, although receiving bias may still persist amid favourable liquidity conditions.
The rates fell 4-6 basis points in the previous session.
The one-year OIS rate was at 5.6%, while the two-year OIS rate was at 5.45%, and the most liquid five-year OIS rate was at 5.56%.
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