MUMBAI: Indian government bond yields are likely to rise marginally at the start of the week after the US peers ended the previous week higher following mixed jobs report for August, which could be the last such data before the central bank’s next meeting.
The benchmark 7.26% 2033 bond yield is likely to be in the 7.16-7.20% range on Monday after ending the previous session at 7.1671%, a trader with a private bank said.
The yield eased four basis points last week.
“Though, the data provided cues for both ways, Treasury yields have risen again, and hence local bond yields could also see some 2-3 basis points of upmove,” the trader said.
US yields rose on Friday, after the August non-farm payrolls report showed that the world’s largest economy added more jobs than expected last month, but the unemployment rate rose with a slight decline in wage inflation.
India bond yields seen little changed ahead of key growth data
The unemployment rate increased to 3.8%, up from 3.5% in July but still below the Fed’s latest median estimate of 4.1% by the fourth quarter of this year.
The US bond market will be closed on Monday for Labor Day. Still, the odds of another rate hike by the Federal Reserve later this month declined continuously, easing to around 7%.
Back home, traders will also keep a watchful eye on the domestic inflation trajectory and the evolving liquidity situation as the Reserve Bank of India (RBI) reviews its decision to reduce liquidity in the banking system through an incremental cash reserve ratio.
India’s retail inflation spiked to a 15-month high of 7.44% in July from 4.87% in June, while traders anticipate another elevated reading for August.
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