MUMBAI: Indian government bond yields are expected to move higher in early deals on Monday, mirroring the sharp spike in US Treasury yields after healthy jobs data in the world’s largest economy reduced bets of a deeper rate-cutting cycle.
The 10-year bond yield is likely to move between 6.76% and 6.80%, a trader with a private bank said, compared with its previous close of 6.7724%.
“We could see a marginal gap-up opening in terms of yields, and the benchmark could test the par levels. However, post the initial adjustment, bonds are expected to be in a narrow range, with the focus shifting to the next set of data,” the trader said.
US Treasury yields jumped, with the 10-year at its highest since November 2023, after data showed employers added 256,000 jobs in December, far above economists’ estimates of 160,000, while the unemployment rate fell to 4.1%, below predictions of 4.2%.
The data defied an anticipated slowdown, leaving Federal Reserve policymakers to puzzle over the need for more interest rate cuts in a strong economy. US yields have been rising on concerns that the incoming Donald Trump administration’s policies could reignite inflation in addition to boosting growth, leading to fewer rate cuts.
India bond yields rise in lead up to domestic inflation data
The US central bank signalled a slower pace of rate cuts at its December meeting.
Interest rate futures are currently pricing in just 26 basis points of rate cuts in 2025, less than the Fed’s prediction of 50 bps of reductions.
The market will now focus on inflation data from India and the US, due on Monday and Wednesday, respectively.
Consumer price inflation in India likely fell to 5.3% in December from 5.48% in November as the rise in food prices moderated, a Reuters poll of economists showed.
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