MUMBAI: Indian government bond yields were largely unchanged in early trade on Tuesday, showing a muted reaction to a renewed selloff in Treasuries that were hit by rising political uncertainties.

The benchmark 10-year yield was at 7.0055% as of 10:00 a.m. IST, following its previous close of 7.0105%.

“Overall activity is expected to remain shallow with benchmark bond yield stuck around the 7% mark, unless we have some new trigger,” a trader with a private bank said.

US bond yields rose on Monday, with the 10-year yield rising to a one-month high and nearly hitting 4.50% as uncertainty around the US presidential election as well as the French elections led to caution.

Investors have raised bets that former President Donald Trump may out beat US President Joe Biden at the elections due in November, especially after last week’s debate.

This has led to a selloff in longer-dated papers, even as short-term bonds are seen supported as bets of rates cuts from Federal Reserve remain unchanged.

Investors are anticipating 46 basis points of rate cuts from the Federal Reserve in 2024, according to the CME FedWatch tool.

Indian bond yields marginally higher tracking Treasury moves

Meanwhile, traders will continue to gauge the pace of foreign inflows into Indian government bonds over the next few days after an underwhelming start of debt getting included in the JPMorgan’s emerging market index.

Inflows of around $200 million each have been witnessed on the first two days of the inclusion, while overall purchases of these investors in bonds under the Fully Accessible Route have risen above $11 billion since the announcement last September.

Indian states will raise 141 billion rupees ($1.7 billion) through sale of bonds in the first auction for the second quarter of the fiscal year.