MUMBAI: Indian government bond yields moved up at the start of the new quarter, following Treasury yields, while foreign inflows on the first day of Indian debt getting included in a global index were weaker than estimated.
The benchmark 10-year yield was at 7.0191% as of 10:00 a.m. IST on Monday, following its previous close of 7.0095%. The yield rose 4 basis points (bps) last week, but posted its third consecutive quarterly decline.
“For now, it seems 7% will become the bottom support unless we see some revival in foreign flows or a correction in Treasury yields,” trader with a primary dealership said.
U.S. yields rose on Friday and gained further during Asia hours as uncertainty around the U.S. presidential election, as well as imminent French legislative elections outweighed an earlier confidence boost from a slowdown in inflation.
The U.S. 10-year yield broke its key technical resistance level of 4.35% and was around 4.40%, with traders eyeing a further move towards 4.50% handle.
Indian bond traders expect index-related flows in debt, yields flattish
Personal consumption expenditures (PCE) price index showed a flat reading for May, following a 0.3% gain in April. In the 12 months through May, the PCE price index increased 2.6% after advancing 2.7% in April.
Investors are now anticipating 50 bps of rate cuts from the Federal Reserve in 2024, and await a key employment data due on Friday.
Back home, the response from foreign investors was underwhelming on Friday as they bought only $200 million of government bonds on the first day of inclusion of Indian debt in the JPMorgan debt index.
Overall purchase of government bonds under the Fully Accessible Route (FAR), which are now a part of the index, has touched $11 billion since the inclusion’s announcement last September.
Traders still remain hopeful of inflows picking up in coming days, but said they would be spread out and not come in on last day of the month, which was earlier expectation.
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