Government bond yields in India are poised for a potential decrease early in the week, tracking a similar trend in US Treasury yields. Lackluster economic data from the United States has fueled expectations of monetary policy easing, influencing global bond markets.
According to market projections, the 10-year benchmark yield is expected to fluctuate within a range of 7.03 per cent to 7.08 per cent, reflecting a potential dip from its previous close of 7.0572 per cent. A trader from a private bank highlighted that bullish movements might be observed, aligning with the recent dip in the 10-year US yield below the crucial threshold of 4.20 per cent.
The decline in US yields on Friday, particularly the 10-year yield reaching levels not seen in three weeks, was driven by a further contraction in US manufacturing during February. This has slightly increased expectations for Federal Reserve rate cuts in May, with the probability rising to 28 per cent, up from 24 per cent the previous week, according to the CME FedWatch tool.
On the domestic front, traders are awaiting fresh cues as central government bond supply takes a pause, while states consistently fall short of their borrowing targets. States are planning to raise Rs 279.81 billion ($3.38 billion) through bond sales, compared to the initially scheduled Rs 381.66 billion.
Despite India’s economy expanding by 8.4 per cent in the October-December quarter, surpassing market estimates, expectations for a rate cut have remained unchanged. Economists suggest that the GDP figures might overstate actual growth.
The Reserve Bank of India (RBI) maintained its interest rates in February for the sixth consecutive time, emphasizing its commitment to achieving a sustainable 4 per cent inflation target. Key indicators, such as Brent Crude futures edging up by 0.2 per cent to $83.70 per barrel, and the 10-year US Treasury yield at 4.1934 per cent, contribute to the complex dynamics influencing India’s bond market.
As global economic indicators continue to shape investor sentiment, the coming weeks will likely witness shifts in bond yields, with market participants closely monitoring both domestic and international factors influencing the fixed-income landscape.
