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Updated 09:53 IST, April 23rd 2024

Indian Bond Yields Stable Amid State Debt Auctions, Global Factors Awaited

Expectations suggest a subdued market atmosphere following a correction in bond yields on the preceding day.

Reported by: Business Desk
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South Korean shares rose on Monday as softer US economic data last week fuelled optimism that the Federal Reserve is about to end its tightening cycle. The won strengthened, while the benchmark bond yield fell.
Bond yield | Image: Pexels

Bond yield stable: Indian government bond yields are anticipated to maintain stability in early trading on Tuesday, with no significant shifts in global factors. Traders will closely monitor the debt supply from states while the benchmark 10-year yield is projected to fluctuate within a range of 7.17 per cent to 7.21 per cent, following its previous close at 7.1890 per cent, as reported by a trader with a primary dealership.

Expectations suggest a subdued market atmosphere following a correction in bond yields on the preceding day. With no notable changes in fundamentals, sideways trading is likely to prevail for the time being. Indian states plan to raise 120 billion rupees ($1.44 billion) through bond sales later in the day, marking a decline in issuance for the third consecutive week.

On Monday, yields and overnight index swap rates experienced a decline as oil prices retreated after an initial rise. This prompted some short covering in debt and increased interest in swaps, contributing to a positive sentiment. Oil prices, which had previously surpassed $92 per barrel earlier in the month, were trading around $87 per barrel during Asian trading hours.

Given India's status as one of the largest importers of oil, fluctuations in oil prices can impact domestic retail inflation, potentially complicating the Reserve Bank of India's inflation target. Governor Shaktikanta Das emphasized in the April meeting minutes that while India has achieved success in its disinflation process, the vulnerability of the inflation trajectory to frequent supply-side shocks should not divert the attention of the monetary policy committee.

In contrast, U.S. Treasury yields remained steady on Monday, with the 10-year yield hovering near the 4.60% mark. Recent statements from Federal Reserve officials indicating a lack of urgency to cut rates in light of the robust economy have contributed to this stability. Investors are currently pricing in the possibility of around 40 basis points of rate cuts by the end of the year, compared to over 150 basis points expected at the beginning of 2024, according to CME's FedWatch Tool.

Key indicators include Brent crude futures, which were 0.3 per cent higher at $87.25 per barrel, and the ten-year U.S. Treasury yield at 4.6167 per cent, with the two-year yield at 4.9735 per cent. 

With Reuters Inputs

Published 09:53 IST, April 23rd 2024