MUMBAI: Indian government bond yields are likely to continue their dipping trend in early deals on Friday, after US inflation data did little to change expectations of a rate cut from the Federal Reserve next week.
The yield on the 10-year benchmark note is expected to be in the 6.45%-6.49% range, said a trader at a private bank. It closed at 6.4666% on Thursday.
Still, any large declines will be capped amid profit booking as well as ahead of fresh debt supply, as New Delhi aims to raise 280 billion rupees ($3.17 billion) through the sale of bonds later in the day.
“The positive momentum should sustain, and we could see 6.45% being tested on the benchmark bond yield, but auction results would be the key guiding factor for the next set of moves,” the trader said.
US yields fell, with the 10-year yield declining below 4% for the first time since April, after data showed August retail inflation rose 0.4% month-on-month from July’s 0.2% rise and was just above the 0.3% increase expected.
Year-on-year, the CPI rose 2.9% as expected, and was a bit higher than July’s 2.7% rise.
The data did little to change expectations of a rate cut from the Fed next week, with the odds of 75 basis points of rate cuts in 2025 rising to more than 80%, according to the CME FedWatch Tool.
India’s August inflation data, due on Friday, is pegged at 2.1%, compared with July’s 1.55% amid a fading “base effect” and rising food prices, according to a Reuters poll.
American Dollar Exchange Rate