Indian government bond yields are likely to trend lower at the start of the week, tracking a decline in U.S. Treasury yields, as weak economic data aided bets on easing monetary policy. The benchmark 10-year yield is expected to hover in a 7.03%-7.08% range, following its previous close of 7.0572%, a trader with a private bank said.
“We may see some bullish moves as the 10-year U.S. yield has ended below the critical level of 4.20% after some days, and if the trend persists, technically it opens the door for a move towards the 4% mark,” the trader said. U.S. yields eased on Friday, with the 10-year yield easing to levels last seen three weeks ago after U.S. manufacturing slumped further in February, marginally improving bets for May rate cuts by the Federal Reserve.
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The odds for a rate cut in May improved to 28%, up from 24% last week, according to the CME FedWatch tool. Back home, traders continue to await fresh domestic cues at a time when central government bond supply has stopped, while states continue to undershoot their borrowing on a consistent basis.
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Indian states aim to raise 279.81 billion rupees ($3.38 billion) through the sale of bonds, against the 381.66 billion rupees on the calendar. Meanwhile, India’s economy grew 8.4% in the October-December quarter, much faster than market estimates of 6.6% and also higher than the 7.6% growth in the previous three months, but did little to alter rate cut expectations.
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However, the third-quarter GDP print may be overstating growth, economists said, pointing to a more modest increase in gross value added in the economy. In February, the central bank kept rates unchanged for a sixth consecutive time and reiterated its commitment to meet its 4% inflation target on a sustainable basis.
