MUMBAI, June 19 (Reuters) – Indian government bond
yields are expected to be largely unchanged in early trading on
Wednesday, as market participants eye stronger triggers for
direction from the current levels.
India’s benchmark 10-year yield is likely to
move in a 6.95%-6.99% range, following its previous close of
6.9789%, a trader with a state-run bank said.
“Fundamentally, there are no strong cues on either side for
bonds to react in a strong manner, and hence we may see
benchmark yield consolidating below 7%, and move in a very tight
range,” the trader added.
U.S. yields eased on Tuesday after data showed retail sales
in the world’s largest economy grew less than expected in May,
reinforcing expectations that the Federal Reserve is likely to
start lowering interest rates this year.
Philadelphia Fed President Patrick Harker expects only one
rate cut in 2024, as he sees slowing but above-trend economic
growth, a modest rise in the unemployment rate, and a “long
glide” back to target for inflation as his base case.
The futures market is pricing in nearly two rate cuts of 25
bps each in 2024, even as the Fed slashed its forecast to only
one cut of 25 bps this year, down from three projected in March,
according to the CME FedWatch tool.
In India, minutes from the central bank’s latest policy
meeting are due on Friday. Two external members had voted for a
change in stance as well as a rate cut, even as the authority
maintained the status quo on both earlier this month.
India should avoid “adventurism” and continue to focus on
bringing down inflation towards the target of 4% despite the
growing clamour to signal a pivot in monetary policy, Reserve
Bank of India Governor Shaktikanta Das said on Tuesday.
Market participants will also remain focused on foreign
inflows into bonds, ahead of their inclusion in JPMorgan’s
emerging market debt index.
KEY INDICATORS:
** Brent crude futures little changed at $85.35 per
barrel, after rising 1.3% in previous session
** Ten-year U.S. Treasury yield at 4.2170%, two-year
yield at 4.7040%
** RBI to auction treasury bills worth 120 billion rupees
($1.44 billion)
($1 = 83.3790 Indian rupees)
(Reporting by Dharamraj Dhutia;
Editing by Eileen Soreng)
Read More: INDIA BONDS-Indian bond yields seen flat as traders seek directional cues