By Dharamraj Dhutia
MUMBAI, Jan 3 (Reuters) – Indian government bond yields are expected to edge up further on Wednesday, as focus shifts back to U.S. Treasury yields that started the New Year with an uptick.
The Indian 10-year benchmark bond yield IN071833G=CC is expected to drift in the 7.18%-7.23% range, following its closing at 7.2105% in the previous session, a trader with a private bank said.
“There was some negative sentiment locally, and with U.S. yields also beginning the year with an upwards bias, we could see some more selling pressure through the day,” the trader said.
U.S. bond yields moved higher after trading resumed on Tuesday after the holiday break, as traders lowered expectations for rate cuts in 2024.
Even as the market is pricing in that the Federal Reserve will start cutting rates from March, the probability has eased to 79% from around 89% last week.
The odds for 150-basis-points rate cuts in 2024 have also eased to 73% against 84% last week. FEDWATCH
Investors will monitor economic data this week, including non-farm payroll due on Friday, that may influence whether the Fed begins to cut rates in March.
The minutes of the Fed’s December policy meeting will be released later in the day.
Indian bond yields have risen in the first two trading sessions of 2024, after states announced a record borrowing schedule of 4.13 trillion rupees ($49.6 billion) for the last quarter of the financial year.
States sold 160 billion rupees in the first auction for the quarter, with their spread over the benchmark government bond yield rising to a two-year high.
Investors are expected to continue demanding higher premiums over federal government debt in the coming weeks.
Traders will also keep an eye on foreign investments that notched a remarkable jump in the last three months of 2023, with inflows reaching a six-year high.
KEY INDICATORS:
** Brent crude futures LCOc1 0.1% lower at $75.85 per barrel, after easing 1.5% in the previous session
** 10-year U.S. Treasury yield US10YT=RR at 3.9406%, two-year yield US2YT=RR at 4.3242%
** RBI to auction Treasury bills worth 270 billion rupees
($1 = 83.2880 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Read More: INDIA BONDS-India bond yields may rise as US yields back in focus