MUMBAI: Indian government bond yields are expected to see an uptick at the start of the new week, tracking a sharp climb in US Treasury yields after strong economic data in the world’s largest economy dampened aggressive rate-cut bets.
India’s benchmark 10-year yield is expected to hover in the 7.05%-7.10% range, a trader with a primary dealership said, following its previous close of 7.0555%.
The yield fell 12 basis points last week, the sharpest decline since Nov. 11, 2022.
“The data has surprised everyone, and it is clearly evident from the move in the Treasury yields, and there should definitely be a mild gap-up opening for bond yields today,” the trader said.
“Friday’s low may not be breached now, until the monetary policy decision,” the trader added.
US yields jumped, with the 10-year yield rising above the 4% handle on Friday and further extending the move in Asian hours on Monday, as non-farm payrolls increased by 353,000 jobs last month, nearly double the 180,000 that economists polled by Reuters had estimated.
India’s 10-year bond yield falls most in 15 months on budget boost
for December was revised higher to show 333,000 jobs added instead of 216,000 as previously reported, while inversion between the 2-year and 10-year U.S yields rose to its highest in a month as investors further trimmed bets over the timing and pace of rate cuts.
The odds for a rate cut in March have now dropped to around 15% from 66% last month, while the odds for a 150 bps point rate cut in 2024 have also plummeted to just 25% from a near certainty earlier.
The underlying sentiment remains supportive as the market looks forward to the Reserve Bank of India’s monetary policy decision due on Thursday, after a boost from the federal budget announcement last week.
India will aim to reduce the fiscal deficit to 5.1% of gross domestic product, and will aim to gross borrow 14.13 trillion rupees ($170.27 billion) via bonds, sharply below expectations and also lower than the current year’s planned borrowing.
Key indicators:
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Brent crude futures 0.3% higher at $79.30 per barrel, after easing 1.7% in the previous session
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10-year US Treasury yield at 3.8915%, two-year yield at 4.2169% Reuters
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