MUMBAI: Indian government bond yields started the session lower on Wednesday as bullish sentiment persisted before the Union Budget announcement due on Thursday, while Treasury yields strengthened their downward momentum.
India’s benchmark 10-year yield was at 7.1442% as of 10:00 a.m. IST, following its previous close at 7.1570%.
“There is hardly anyone who is anticipating any negative risk from the budget, and with borrowing and fiscal deficit numbers expected to meet market estimates, traders are positioning for a post-budget rally in price,” said a trader with a primary dealership.
India is due to announce the federal budget for the new financial year starting April 1 on Thursday.
The government is likely to keep its gross market borrowing for fiscal 2025 close to the current fiscal year’s level of 15.43 trillion rupees ($185.66 billion), two sources told Reuters.
Citing the lower borrowing figure, Indian funds, insurers and banks have increased their positions in longer-duration bonds as they anticipate the budget being fiscally conservative with no pre-election spending surprises.
India bond yields flat as traders eye Fed meet, Union Budget
A Reuters poll predicted the government would target fiscal deficit as a percentage of gross domestic product at 5.30% for fiscal 2025 from 5.9% this fiscal year. Traders will also keep an eye on the Federal Reserve’s monetary policy decision due after Indian market hours.
While status quo is expected on rates, commentary from Chair Jerome Powell will be a crucial trigger for gauging interest rate trajectory.
The 10-year US yield was inching downwards towards the 4% handle before the decision, while traders have trimmed down the bets on the timing and pace of rate cuts in 2024.
The odds of a rate cut in March now stand at around 41%, down from 88% last month, according to the CME’s FedWatch Tool.
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