MUMBAI: Indian government bond yields are expected to open lower on Friday, tracking a sharp decline in US peers after data showed consumer prices in the world’s largest economy slipped in June and boosted bets of a September interest rate cut.
The benchmark 10-year yield is likely to move in a 6.94%-6.99% range, having closed at 6.9832% in the previous session, a trader with a private bank said.
“The fall in inflation took the market by surprise in the US and Indian bond yields will also mirror the move, albeit with a lower magnitude as there would be a lot of selling pressure at these levels,” the trader added.
US yields dropped, with the 10-year yield touching a four-month low on Thursday.
It pared some fall in Asian hours on Friday.
The US consumer price index (CPI) dipped 0.1% last month after being unchanged in May.
For the 12 months through June, the CPI rose 3.0% following a 3.3% gain in May.
A Reuters poll had estimated inflation to rise 0.1% month-on-month, and 3.1% for 12 months to June.
The probability of a 25-basis-point rate cut by the Federal Reserve in September jumped to 93% from around 75% before the inflation data.
India bonds not reacting to strong domestic growth, yields little changed
While, after a long gap, bets of over 50 bps of rate cuts in 2024 have risen as the market is now eyeing 61 bps of cuts, according to the CME FedWatch Tool.
Trader focus will now be on India’s consumer inflation data as well as fresh debt supply via weekly auction, both due later in the day.
A Reuters poll predicted retail inflation to edge up to 4.80% in June, snapping five months of declines, largely because of a jump in vegetable prices and against 4.75% in May.
Meanwhile, New Delhi will raise 220 billion rupees ($2.63 billion) via the sale of bonds on Friday, which includes the 7-year and 40-year bonds.
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