India bonds dip as US yields rise; inflation data awaited

MUMBAI: Indian government bonds edged lower early on Thursday, paring recent gains as US Treasury yields rose, with investors awaiting domestic inflation data later in the day.

The 10-year 6.48% 2035 bond yield was at 6.7258% at 9:50 a.m. IST after ending at 6.7088% on Wednesday, down 5 basis points over the past two sessions.

“The only hope of breaking 6.70% on the downside was a further decline in US yields, but since that is not the case anymore, we could see the 10-year bond yield settling around 6.75% levels,” trader with a primary dealership said.

US Treasury yields rose overnight, after a report stated non-farm payrolls increased by 130,000 jobs in January following a downwardly revised 48,000 rise in December.

Economists polled by Reuters had called for a 70,000 increase.

Expectations that the Federal Reserve could cut rates in the near term rose after weak retail sales data, but stronger jobs numbers later pushed US yields higher.

The 10-year US yield climbed to 4.18% after touching 4.1250% on Wednesday.

Back home, India’s consumer inflation is likely to have risen for a third straight month to 2.4% in January, a Reuters poll showed.

The month marks the first reading under a new price series and a return within the central bank’s 2%–6% target band since August.

DBS Bank said the new series is unlikely to affect policy in the near term and expects rates to remain on hold.