MUMBAI: Indian government bond yields are likely to be little changed on Wednesday, as traders await the US Federal Reserve’s monetary policy decision later in the day, while elevated US yields and oil prices continue to hurt sentiment.
The 10-year benchmark 7.18% 2033 bond yield is likely to move in a 7.15%-7.19% range, compared to its previous close of 7.1597%, a trader with a private bank said.
“We are in for a range-bound trading session, as there is no major news to track apart and major action could be seen tomorrow after the Fed’s policy decision as well as guidance,” the trader said.
The Fed is expected to stand pat on policy rates, but guidance for the next quarter could move the markets either ways, traders said.
The odds of a rate hike in November currently stand below 30%.
The 10-year US yield was close to its highest level in 16 years, and a further rise could lead to some selling pressure on local bonds.
The rate-sensitive two-year yield was around 5.10%.
Oil prices also remain elevated, with the benchmark Brent crude contract hovering around $94 per barrel, after hitting fresh 10-month high levels on Tuesday.
India is one of the largest importers of the commodity, and elevated prices could impact local inflation, which eased to 6.83% in August from 7.44% in July but remained above the Reserve Bank of India’s target band.
India bond yields edge higher ahead of fresh supply
Market participants are expecting Indian bonds to get included in global indexes, especially as foreign investors booseted buying of bonds with unlimited investment, while the RBI sought feedback on settlement via the Euroclear platform.
JPMorgan will likely review the composition of its index by early October, while a review of the FTSE global bond index is due before September end.
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