MUMBAI: Indian government bond yields moved marginally higher on Wednesday with the benchmark yield breaching 7% as it tracked a rise in US Treasury yields, though ongoing bullish sentiment in the domestic market contained some of the uptick.

India’s benchmark 10-year yield was at 7.0079% as of 10:00 a.m. IST, following its previous close of 6.9956%.

“Benchmark should now consolidate around the 7% mark for this week, as markets gear up for an eventful next week,” a trader with a primary dealership said.

US yields rose amid supply pressure and as consumer confidence unexpectedly improved in May, raising uncertainty over the timing and magnitude of rate cuts by the Federal Reserve.

The futures market is pricing only around 34 basis points (bps) of rate cuts this year, compared with over 50 bps earlier in the month, according to CME FedWatch Tool.

However in India, broader sentiment continued to remain favourable as the central bank’s record surplus transfer raised bets the government’s fiscal position would be strengthened and that could result in a further cut in supply.

New Delhi has already lowered the supply of Treasury bills till end of June, and has bought back notes. It aims to buy back bonds worth 400 billion rupees ($4.80 billion) on Thursday.

India’s January-March and annual growth rate for fiscal 2024 is due after market hours on Friday, while markets await the result of general election in India on June 4.

India bonds not reacting to strong domestic growth, yields little changed

That will be followed by the Reserve Bank of India’s monetary policy decision on June 7, with expectations of status quo.

“MPC stance may remain unchanged in June and (a) move to neutral might happen only in August,” Citi said in a note.