MUMBAI: Indian government bond yields are expected to move marginally higher in early trading on Thursday, tracking US Treasury yields, while market eyes response to government’s debt buyback.
The benchmark 10-year bond yield is likely to move between 6.74% and 6.79%, compared with its previous close of 6.7676%, a trader with a private bank said.
“Since the benchmark bond yield was unable to break the key 6.75% level convincingly on Wednesday, we are likely to see some upward move today, and even the move in US yields will support the bears,” the trader said.
US yields rose on Wednesday, as investors continued to price in a less aggressive monetary easing cycle from the Federal Reserve, with the two-year and 10-year yields both rising above 4%.
Dallas Fed President Lorie Logan, who is not a voter at this year’s Federal Open Market Committee (FOMC) said she supported last month’s big interest rate cut but wants smaller reductions ahead, given upside risks to inflation and “meaningful uncertainties” over the economic outlook.
The odds of a status quo in November Fed policy have risen to 17%, from less than 10% at the start of the week, while aggregate cuts in 2024 are now seen at 46 bps.
Still, any large rise in yields is ruled out as underlying market sentiment remains supportive of bond prices after Indian debt got included in yet another global index and as the Reserve Bank of India changed its policy stance to “neutral”.
Indian bond yields may track US peers lower
Global index provider FTSE Russell will include bonds in the Emerging Markets Government Bond Index from September 2025, potentially drawing billions of dollars into bonds, and demand will pick up in the medium term, keeping yields in check, analysts and traders said.
On Wednesday, RBI Governor Shaktikanta Das after changing the policy stance said there was greater confidence now on the last mile of disinflation towards the central bank’s 4% medium-term target.
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