MUMBAI: Indian government bond yields are likely to start the penultimate trading session of 2024 with an upward bias, tracking a similar move in US Treasury yields.
The 10-year yield is likely to move between 6.77% and 6.80% on Monday, a trader with a private bank said, compared with its previous close of 6.7852%.
“We could see some bias towards a higher opening but, through the day, there may not be much action as the market is waiting for the (calendar) year-end and many trading desks are thinly staffed,” the trader said.
Trading volumes have plummeted, with the daily average dropping to around 381 billion rupees ($4.46 billion) over the last two weeks from 719 billion rupees in the preceding two weeks, data from the Clearing Corp of India showed.
US Treasury yields moved higher, with the 10-year yield staying near an eight-month high, as investors pare debt holdings ahead of the year-end and await the new year uncertain about interest rate cuts.
The underlying sentiment in the world’s largest economy has turned cautious since last week when the Federal Reserve lowered its rate cut forecast for 2025 to 50 basis points.
India bond yields rise in lead up to domestic inflation data
The odds of a pause in January are at 89%, according to CME’s FedWatch Tool.
The sentiment at home is also cautious after the rupee dropped to a record low on Friday.
It slid 0.6% over the week, its biggest such move since March, as dollar demand rose due to non-deliverable forwards and currency futures maturing.
The widening banking system liquidity also made investors cautious of avoiding portfolio losses at the fag end of the quarter.
American Dollar Exchange Rate