MUMBAI: Indian government bond yields are expected to move marginally higher in early trading on Friday, as US yields rose further, while traders await fresh debt supply through a weekly auction.
The benchmark 10-year bond yield is likely to move between 6.76% and 6.780%, compared with its previous close of 6.7775%, a trader with a private bank said.
New Delhi aims to raise 290 billion rupees ($3.45 billion) through the sale of five-year and 40-year bonds later in the day.
“With volatility reducing a bit, the market may wait for auction cutoffs, especially for the five-year paper for further action, and to also judge the quantum of steepening in the curve with which market is comfortable currently,” the trader said.
US yields climbed further on Thursday, especially at the longer end, after data showed that the consumer price index increased 0.2% last month after posting the same gain in August.
In the 12 months through September, the CPI climbed 2.4%, the smallest year-on-year rise since February 2021 after a 2.5% rise in August.
However, excluding the volatile food and energy components, the CPI increased 0.3% in September after rising 0.3% in August.
In the 12 months through September, the so-called core CPI advanced 3.3%, following a 3.2% rise in August.
“The chances of a 50 bps cut in November are practically zero now, while October payrolls numbers now assume higher significance due to the impact of hurricane season,” said Madhavi Arora, chief economist at Emkay Global Financial Services.
The odds of a status quo in November Fed policy stayed around 15%, but 85% still expecting a 25-basis-point cut from the Federal Reserve.
India bond yields start flattish, with eyes on Fed decision
Still, any large rise in domestic bond yields is ruled out as underlying market sentiment remains supportive of bond prices after global index provider FTSE Russell included Indian debt in its emerging market debt index, and as the Reserve Bank of India changed its policy stance to “neutral” earlier this week.
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