MUMBAI: Indian government bond yields are expected to trade little changed in early session on Friday, after minutes of the Reserve Bank of India’s meeting did not provide any fresh triggers, while traders were focused on a weekly debt supply.
The benchmark 10-year yield is likely to move between 6.84% and 6.87% until the debt auction, compared with its previous close of 6.8521%.
Rising food prices have prevented India’s headline inflation from hitting the central bank’s 4% target, requiring the monetary policy committee (MPC) to stick to its restrictive stance, minutes of the RBI’s August meeting showed.
“Persistent food inflation is imparting stickiness to headline inflation,” Governor Shaktikanta Das said in the minutes released on Thursday.
“Durable alignment of inflation to the target of 4% is still some distance away.”
New Delhi will raise 230 billion rupees ($2.74 billion) through sale of bonds later in the day, including a five-year bond. The cutoff for this note will provide clarity on the extent of the steepening of India’s bond yield curve.
“As anticipated, the minutes focused on inflation management and provided very little in terms of any new content or guidance, so bonds should stay agnostic to them, with supply being the main trigger for the day,” the trader said.
India bonds not reacting to strong domestic growth, yields little changed
Investors await Federal Reserve Chair Jerome Powell’s speech on Friday at the Jackson Hole symposium in Wyoming, which may provide guidance on timing and magnitude of US rate cuts in 2024.
The minutes of Fed’s July meeting reinforced expectations that the cut cycle will start in September, as a vast majority of officials said such an action was likely.
US bond yields moved marginally higher as the odds of a 50 basis point cut in September eased to around 27%, down from around 35% on Thursday, according to CME FedWatch Tool.
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