India bonds set to open little changed ahead of local, US inflation data

MUMBAI: Indian government bonds are likely to be little changed in opening deals on Wednesday as traders await the next set of cues in the form of retail inflation prints in India and the United States for clues on the interest rate trajectory.

The yield on the benchmark 6.94% 2036 bond is expected to trade in the 6.76% to 6.80% range, according to a trader at a private bank, after closing at 6.7791% on Tuesday. Bond yields move inversely to prices.

“After some recovery in late trading yesterday, it is clear that the benchmark yield may not be able to break above 6.80% in a sustainable manner, so we are in for a range-bound session today, with the focus on inflation,” the trader said.

India’s retail inflation data is due later in the day.

A Reuters poll expects inflation to accelerate to 4.50% in July from 4.38% in June.

The benchmark Brent crude contract stayed around the $90 per barrel mark in Asian trading after jumping by nearly 6.5% in the last two sessions, amid rising doubts over a peaceful settlement between the US and Iran, who have been at war for the last five-and-a-half months.

Elevated oil prices could stoke inflation and strain the fiscal balance, current account and currency in India, the world’s third-largest crude importer.

Traders are more likely to react to US inflation data, which will be out after Indian market hours.

Rising price pressures in the US have led the implied probability of a rate hike by the Federal Reserve in September to an even chance, with the 10-year Treasury yield hovering around the 4.70% mark.