MUMBAI: Indian government bond yields are likely to rise in early trading on Monday, mirroring U.S. yields after the closely watched non-farm payrolls report showed continuing strength in the U.S. labour market.
The 10-year benchmark bond yield is expected to trade in the 7.23-7.26% range following its previous close at 7.2348%, a trader with a private bank said.
“The 10-year U.S. yield surged and sustained above 4% so we may see an upward movement in local yields. Amid a lack of fresh cues, yields may remain range-bound during the day,” the trader added.
U.S. Treasury yields rose on Friday as persistent strength in the labour market sparked concerns of accelerating inflation and the Federal Reserve’s rate cuts.
Non-farm payrolls rose by 216,000 jobs in December, while economists polled by Reuters had forecast payrolls increasing by 170,000 jobs.
India bond yields see another uptick as rising US peers hurt demand
Futures markets are pricing in a 44% chance that the Fed keeps benchmark rates at their current range of 5.25% to 5.5% at its March meeting, up from 11.5% a week ago, according to CME’s FedWatch Tool.
Overall, markets see the Fed cutting rates by a total of 132 basis points by the end of the year, down from expectations of more than 160 basis points in cuts two weeks ago.
Meanwhile, oil prices rose on Friday after U.S. Secretary of State Antony Blinken began a week-long sweep through the Middle East in an attempt to contain regional tensions stoked by the Israel-Hamas conflict.
Back home, concerns persist over heavy debt sales in the last quarter. States aim to raise 4.13 trillion rupees ($49.71 billion), while the central government plans to sell bonds worth 2.37 trillion rupees, taking total supply to around 6.50 trillion rupees.
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