MUMBAI: Indian government bond yields trended lower early on Wednesday as bets of another large rate cut from the US Federal Reserve rose, while some traders also expected a reduction in the domestic government’s planned borrowing for the fiscal second half.
The benchmark 10-year yield was at 6.7483% as of 9:45 a.m. IST, compared with its previous close of 6.7604%.
“There are multiple positives that has led to a push in benchmark yield below 6.75% again, including rising odds of another bumper rate cut from the Fed in November,” trader with a state-run bank said.
The interest rate futures market has assigned a 60% probability that the Fed would cut rates by another 50 bps in its November meeting, with aggregate cuts for 2024 seen around 80 bps.
The Fed slashed rates by a larger-than-usual 50 basis points last week, and has guided the markets for another 50 bps of cuts in 2024.
“Some sections are also bullish as far as some cut in gross borrowing is expected, which is also helping,” the trader said.
US bond yields eased, led by a sharper fall in the two-year bond yield, as weak consumer confidence numbers and a lower-than-expected business conditions index nudged up the possibility that the Fed could do another 50 basis point cut.
The spread between the two-year and 10-year US yields rose above 20 basis points, the highest since June 2022.
India bond yields steady ahead of $4bn state debt sale
Meanwhile, India is expected to announce its borrowing calendar for the October-March period later this week.
New Delhi aims to raise 14.01 trillion Indian rupees ($167.68 billion) through bond sales in the current fiscal year, with around 6.61 trillion rupees of supply due for the second half, according to budget numbers.
The federal government will sell 340 billion rupees of bonds in its last debt auction for the fiscal first half on Friday.
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