MUMBAI: Indian government bond yields ended higher on Tuesday as traders booked profits after a recent rise in bond prices while awaiting fresh triggers.
The benchmark 10-year bond yield ended at 7.1744%, after closing the previous session at 7.1584%. The benchmark yield edged higher towards the end of the session after trading in a narrow range.
“After the recent sharp fall in yields, there’s some profit booking at current levels. Moreover, U.S. yields are steady so there are no major triggers for local yields,” said Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank.
India bond yields may dip as sentiment remains positive
The 10-year yield will face strong resistance at 7.15% and move towards 7.10% only if there’s any indication of liquidity easing or a further fall in U.S. yields, he added.
U.S. yields were lower, with the 10-year yield persisting around 3.95%, as the Federal Reserve signalled last week that policy tightening is over and projected three rate cuts in 2024.
Markets are pricing in a 69% probability of the Fed cutting rates in March, and a 96% probability in May.
Even though the dot plot shows 75 basis points (bps) of rate cuts in 2024, markets are expecting 125 bps of cuts.
Increasing possibilities of Fed rate cuts have also led to speculations of a change in the Reserve Bank of India’s policy stance, even as it maintained a cautious tone while delivering its policy decision earlier in December.
The minutes of the RBI policy meeting are due this week, and focus will remain on the thinking of central bank members about the interest rate trajectory in 2024.
Earlier in the day, Indian states raised 196.92 billion rupees ($2.37 billion) in their penultimate debt sale for 2023, and the auction cutoffs came lower in line with market expectations.
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