Indian government bond yields were marginally lower in early session on Tuesday, but the benchmark bond yield is likely to remain around a key technical level, as traders await strong triggers. The benchmark 7.26% 2033 bond yield was moving at 7.0693% as of 10:00 a.m. IST, after ending the previous session at 7.0758%.
“Yesterday’s momentum is pulling the yields down, but for the day we do not have any strong bullish factors,” a trader with a state-run bank said. “The benchmark could ease back to 7.07%-7.08% levels by the end of the session.”
The 10-year U.S. yield remains around 3.80%, down nearly 30 bps from its highs hit last week. Markets are closely watching Fed Chairman Jerome Powell’s tone at the U.S. central bank’s July 25-26 meeting, where a rate hike is already factored in, and commentary would be crucial. The odds of a 25-basis point (bps) hike in July remain around 94%, but that of another hike after that have come down sharply.
Back home, the Reserve Bank of India‘s monthly bulletin said food price spikes in the country drove up headline inflation in June, corroborating the monetary policy committee’s (MPC) view that the fight against inflation was far from over. India’s annual retail inflation rate rose to 4.81% in June, snapping four months of easing and erasing chances of early rate cuts.
Meanwhile, Indian states aim to raise 124.30 billion rupees ($1.52 billion) through the sale of bonds later in the day, while New Delhi will raise 310 billion rupees through sale of bonds on Friday, which includes a new 14-year bond.