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MUMBAI: Indian government bond yields are expected to move marginally lower on Tuesday as US interest rate cut bets continue to support sentiment, while the change in guard at the country’s central bank is seen aiding monetary policy easing next year.

The benchmark 10-year yield is likely to move between 6.69% and 6.73%, a trader with a private bank said, compared with its previous close of 6.7175%.

“The appointment of a new governor has raised expectations form the market that a rate cut in February is now a done deal and we should see bonds performing better today after a small gap down opening in yields,” the trader said.

The US 10-year Treasury yield stayed below 4.20% mark in Asian hours, with bets of a 25 basis points rate cut from the Federal Reserve next week rising.

The odds are at 86%, compared to 62% last week and around 83% a day ago.

The Fed, which has already cut rates by 75 bps since September, is due to announce its next decision on Dec. 18.

Back home, market sentiment is likely to be supported after India appointed career civil servant Sanjay Malhotra as its new central bank governor on Monday in a surprise move, as markets had expected Shaktikanta Das to be handed a second extension.

Malhotra, currently revenue secretary to the finance ministry, has worked in financial services, power, taxation and information technology over a three-decade career.

India bond yields may inch up tracking US peers

Economists at Capital Economics said they expect a 25 bps cut in India’s repo rate at Malhotra’s first monetary policy meeting in February, compared to April under Das.

Citi has maintained its view of a 25 bps rate cut in the February, and will reassess the terminal repo rate view of 6% based on the outcome of the meeting, it said in a note.

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