MUMBAI: Indian government bond yields are likely to open marginally lower on Wednesday, with US yields easing from recent highs. The 10-year benchmark 7.26% 2033 bond yield is expected to be in the 6.98% to 7.03% range, after closing at 7.0102% in the previous session, a trader with a private bank said.

There was nervousness that the 10-year US yield may cross the strong technical level of 3.90, but that does not seem to be the case for the time being, so the selling pressure witnesses in local bonds would also reverse, the trader added.

US yields fell across the curve as a deal to raise the US debt ceiling and avoid potential default reassured investors.

India bond yields flattish with focus on US Treasury moves

The 10-year yield and the two-year yield, which is considered to be a closer indicator of interest rate expectations, have moved around 15 basis points (bps) lower from their recent highs.

The odds of a rate hike by the Federal Reserve have eased slightly, but remain comfortably above the 50% mark, indicating that the hiking cycle may not have ended.

The odds of another 25-bps hike on June 14 stand at 58%, after rising to as high as 72% recently. The Fed has raised rates by 500 bps since March 2022 to the 5.00%-5.25% mark.

Meanwhile, traders’ focus remains fixated on India’s growth data for January-March and the previous financial year, releasing later in the day.

A Reuters poll of economists predicted the reading at 5% on-year for the quarter, up from 4.4% in October-December.

A strong report card will confirm our expectations that the economy was amongst the fastest growing amongst its regional peers last year, before the pace moderates, but the release is unlikely to stir onshore financial markets, with the 10-year bond yield back up to hover around 7%, DBS Bank said.

“The RBI’s policy review next week will be a bigger catalyst, where markets are priming for a pause in rates but a potential change in the policy stance.”