MUMBAI: Indian government bond yields rose in the early session on Friday, tracking US Treasury yields, while caution prevailed ahead of a fresh supply of debt through a central government auction due later in the day.
New Delhi aims to raise 350 billion rupees ($4.21 billion) through the sale of bonds, which includes the liquid 14-year bond and a new 30-year green bond.
India’s benchmark 10-year yield was at 7.1900% as of 10:10 a.m. IST after closing at 7.1774% on Thursday.
“US yields have completely changed direction, and there are now talks of further test of upside, which has dampened sentiment locally,” a trader with a private bank said.
“Still, bullish bets from foreign banks are ensuring resistance for the benchmark at around 7.20% levels,” the trader said.
US yields rose after data on Thursday showed job growth remained solid as the number of Americans filing new claims for unemployment benefits last week fell to the lowest level since late 2022.
Rise in US yields nudges Indian bond yields higher
The data strengthened the argument of not rushing into rate cuts and pushed the 10-year yield to above 4.15% for the first time since Dec. 13.
Traders further trimmed the odds of a first Federal Reserve rate cut by March to 53%, down from 73% last week, according to the CME’s FedWatch Tool.
The move in US yields also comes after comments from a Federal Reserve Governor cautioning about inflation staying lower before embarking on a rate easing cycle.
Back home, Reserve Bank of India Governor Shaktikanta Das said the monetary policy in India must remain actively disinflationary despite the recent sharp fall in core inflation.
“When inflation is still above 5.5%, rather close to 6%, our monetary policy has to remain actively disinflationary and it would be too premature to talk in terms of a pivot in our monetary policy,” Das said in an interview with Reuters at the World Economic Forum in Davos.
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