MUMBAI: Indian government bond yields were moving sideways in the early session on Wednesday as the market focus shifted to upcoming inflation prints in the United States and India.
The 10-year benchmark bond yield was at 7.1852% as of 10:00 a.m. IST, following its previous close at 7.1884%.
“The market has already reacted to the index inclusion news and at these levels, there is a need for a fresh trigger for further fall.
With inflation prints due in the next two days, we may see some rangebound moves now,“ a trader with a primary dealership said.
December retail inflation for the world’s largest economy is due after Indian market hours on Thursday and the consumer inflation reading is seen at 0.2% on-month, while the reading for 12 months to December is seen at 3.2%, according to a Reuters poll.
India bond yields decline on optimism over likely Bloomberg index inclusion
US yields remained elevated, with the 10-year yield staying above the critical 4% mark, as the odds of aggressive rate cuts by the Federal Reserve have come down since the start of the New Year.
The odds of a rate action in March have eased to around 66%, down from around 90% towards the end of December, according to the CME FedWatch tool.
Back home, December consumer prices data is due after market hours on Friday.
Retail inflation likely edged up in December on higher food prices but stayed within the Reserve Bank of India’s target range for a fourth consecutive month, according to a Reuters poll. Inflation rose to 5.87% in December from 5.55% in November, according to the median view.
Underlying sentiment stayed positive after a proposal to include bonds on the Bloomberg Emerging Market Local Currency index from September and market participants have pegged inflows of around $3 billion.
Traders also await fresh supply as New Delhi will raise 330 billion rupees ($3.97 billion) through the sale of bonds on Friday.
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