MUMBAI: Indian government bond yields trended up early Thursday, with the benchmark bond yield jumping to its highest level in over two months as it tracked a spike in US peers on strengthening bets of more interest rate hikes by the Federal Reserve.
The benchmark 7.26% 2033 bond yield was trading at 7.1384%, highest since April 24, as of 10:00 a.m. IST after ending the previous session at 7.1072%.
“With US yields rising above the key levels and the upcoming debt supply, benchmark yield should see further uptick and 7.15% is just around the corner,” the trader added.
Indian bond yields stuck in narrow range as directional cues absent
US yields jumped on Wednesday after minutes from the Fed’s June policy meeting reiterated the need for more rate hikes. The 10-year yield neared 4% and the two-year yield approached the 5% handle. Yields are trading at their highest levels in four months.
A united Fed agreed to hold interest rates steady last month, according to meeting minutes released on Wednesday.
Investors will also gauge a flurry of data on the labour market on Thursday and Friday.
The Fed has raised rates by 500 basis points in 10 consecutive meetings from March 2022 to May 2023, before pausing in June. The odds of an increase in July have now risen to around 85%.
Back home, market participants expect government bond yields to rise further in this quarter amid heavy debt supply and diminishing chances of a rate cut before the first half of next year.
India plans to raise 4.47 trillion rupees ($54.23 billion) through bond sales between July and September, with 390 billion rupees on Friday.
State-run banks may continue their government bond purchases amid rising yields but will continue to increase their exposure at a more gradual pace, treasures told Reuters.
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