MUMBAI: Indian government bond yields are expected to rise in opening trades on Friday, tracking US peers, after strong economic data scaled back expectations of an aggressive interest rate cut by the Federal Reserve.
The benchmark 10-year yield is likely to move between 6.85% and 6.89%, compared to its previous close of 6.8580%, a trader with a state-run bank said.
Indian financial markets were closed on Thursday for a public holiday.
US yields rose on Thursday after strong economic data eliminated fears about a hard landing and a benign inflation reading made a more aggressive 50-basis-point cut look less likely.
The US Commerce Department said retail sales rose 1.0% last month, more than expected, after a downwardly revised 0.2% drop in June.
Separately, the US consumer price index increased 0.2% in July, in line with a Reuters poll, after falling 0.1% in June.
“In both inflation and labour data, there are signs of normalization rather than any recessionary impulses. Fed’s policy response can therefore be in the context of normalization,” said Anitha Rangan, an economist at Equirus Group.
India bonds not reacting to strong domestic growth, yields little changed
“Even if Fed cuts in September, it would not be followed with a series of cuts. Patience will dominate the pace of cuts.”
Fed funds futures indicate 75% traders see the odds of a 25 bps cut in September policy, while the odds of 50 bps cut fell to 24% from more than 50% earlier this week.
Meanwhile, oil prices rose on Thursday after US economic data allayed fears of an imminent recession in the world’s biggest economy.
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