INDIA BONDS-India bond yields may dip tracking US peers, move seen capped

MUMBAI, Dec 21 (Reuters) – Indian government bond yields
are expected to trend marginally lower in opening trades on
Thursday, tracking a further downward move in U.S. yields, even
as focus remains on the supply and minutes of the local central
bank’s latest meeting.

The 10-year benchmark bond yield is expected
to move in the 7.14%-7.18% range, after closing at 7.1679% in
the previous session, a trader with a private bank said.

“There could be some bullish bias at the open as U.S. yields
are seeing new lows, but any major rally is unlikely, and the
benchmark bond yield should remain around the 7.15% mark,” the
trader said.

U.S. yields eased more, with the 10-year easing
to 3.85% levels in Asian hours, its lowest level in nearly five
months amid a rise in risk aversion. Bets of an early policy
pivot from the Federal Reserve continued to aid.

U.S. yields have plunged in the last few weeks, with the
10-year yield easing by nearly 120 basis points (bps) on rising
bets that the Fed will deliver rate cuts from as early as March.

Markets now expect a 77% probability of the Fed cutting
rates in March and nearly a 100% probability of an action in
May. The Fed has projected three rate cuts in 2024, but the
market is pricing in five rate cuts of 25 bps each.

Back home, traders will await a fresh supply of debt as New
Delhi aims to raise 300 billion rupees ($3.61 billion) through
the sale of bonds on Friday.

The minutes of the Reserve Bank of India’s December meeting
are also due on Friday and focus will remain on the thinking of
central bank members about the interest rate trajectory in 2024.

The RBI’s objective of aligning inflation with its 4% target
on a durable basis is far from assured and a failure to do so
could risk economic growth, it said in its latest bulletin
published on Wednesday.
KEY INDICATORS:
** Brent crude futures 0.6% lower at $79.25 per barrel,
after rising 0.6% in previous session
** The 10-year U.S. Treasury yield at 3.8585%,
two-year yield at 4.3566%
($1 = 83.1690 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman
)