MUMBAI: Indian government bond yields are expected to trade little changed in early trading on Wednesday, as market participants continue to await strong triggers after fall in oil prices offset the impact of a higher-than-expected inflation reading.
The benchmark 10-year bond yield is likely to move between 6.75% and 6.79%, compared with its previous close of 6.7684%, a trader with a private bank said.
“We saw some buying in the duration towards the end of the session yesterday as Brent crude eased below $75 per barrel.
But with oil around same level and 10-year US yield above 4%, today should not be a very action-packed session,“ the trader said.
Oil prices rose marginally in early Asian trade on Wednesday amid continued uncertainty over conflict in the Middle East.
The benchmark Brent crude contract plunged 7% in last three sessions on persistent demand concerns. India is one of the largest oil importers and easing prices could reduce inflationary pressures.
The retail inflation accelerated to a nine-month high of 5.49% in September due to higher food prices, up from 3.65% in August.
The jump in retail inflation prompted several economists to push back interest rate cut bets to the first half of 2025 from early December, with some citing growth as a bigger factor that could determine the timing of a rate reduction.
The Reserve Bank of India last week changed its policy stance to “Neutral”, and targets inflation at 4%.
India bond yields steady ahead of $4bn state debt sale
Tanvee Gupta Jain, UBS’ chief India economist, said she still expects the central bank to lower the repo rate by 75 basis points in this easing cycle.
“The timing of the rate cut cycle is tricky and we believe MPC would remain data dependent. For policy easing to begin from December either inflation will need to soften well below 5% and/or growth to surprise on the downside.”
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