INDIA BONDS-Indian bond yields fall, shrug off hawkish Powell remarks

MUMBAI, Aug 28 (Reuters) – Indian government bond yields
eased marginally after opening largely unchanged in the early
session on Monday, as traders resumed adding long positions
after no fresh upmoves in U.S. peers despite slightly hawkish
commentary from the Federal Reserve Chair.

The benchmark 7.26% 2033 bond yield was
trading at 7.1762% as of 10:00 a.m. IST after ending the
previous session at 7.2035%.

“Since U.S. yields have not reacted much to the speech,
there is no chance that Indian bond yields could react, and also
since the major event is behind us, traders are again building
fresh positions,” a trader with a private bank said.

The Indian benchmark bond yield eased marginally last week,
recording its first dip, following four straight weeks of gains,
as yields have shown a strong upside resistance.

U.S. yields stayed elevated, with the 10-year yield
remaining around the crucial 4.25% mark, after Fed
Chair Jerome Powell said on Friday that the central bank may
need to raise interest rates further to cool still-high
inflation.

“We are prepared to raise rates further if appropriate, and
intend to hold policy at a restrictive level until we are
confident that inflation is moving sustainably down toward our
objective,” he said.

The two-year bond yield, which is more reactive
to rate expectations was at 5.08%. Even though the odds of
another Fed rate hike in September have continued to remain
around 20%, the bets for rate cuts are getting pushed back. The
Fed has raised rates by 525 basis points since March 2022.

Back home, traders will keep an eye on the domestic
inflation trajectory as well as evolving liquidity conditions,
which will act as major cues.

India’s retail inflation spiked to a 15-month high of 7.44%
in July from 4.87% in June.

Meanwhile, U.S. jobs data, India’s economic growth data for
April-June and the weekly debt auction will act as major
triggers for the week.
(Reporting by Dharamraj Dhutia
Editing by Sonia Cheema)