MUMBAI: Indian government bond yields were higher in early session on Monday, with the benchmark yield moving further away from the crucial 7% mark, tracking an upward move in U.S. yields after strong economic data.
The 10-year benchmark 7.26% 2033 bond yield was at 7.0235% as of 10:00 a.m. IST, after closing at 7.0140% in the previous session. Indian fixed-income markets were shut on Friday.
“With the 10-year U.S. yield back above the 3.40% mark, and little buying interest at sub-7% for the benchmark, yields should inch towards the 7.05%-7.10% zone as the week progresses,” a trader with a private bank said.
U.S. Treasury prices slumped, with yields jumping after the release of labour data that showed April employment and wage figures had outpaced market expectations.
Non-farm payrolls rose by 253,000 jobs last month, but the economy created 149,000 fewer jobs in February and March than previously reported. Economists polled by Reuters had forecast payrolls would rise by 180,000.
India 10-year bond yield falls to 1-year-low ahead of Fed rate decision
The U.S. Labor Department’s closely watched jobs data also showed the unemployment rate falling back to a 53-year-low of 3.4%. Wages grew by 0.5% against the economists’ forecast of 0.3%.
The data pointed to persisting strength in the labour market that could compel the Federal Reserve to keep interest rates higher for longer as it fights to bring inflation under control.
The Fed raised rates by 25 basis points last week and signaled a pause in its tightening cycle at the next few meetings, while a majority of market participants expect the U.S. central bank to start cutting rates from September.
Still, weaker-than-expected demand for the benchmark paper at its auction on Thursday led to the belief that investors are not comfortable going long at current levels. The yield dipped below 7% on Thursday, the first such instance in 13 months.
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