INDIA BONDS-Indian bond yields reverse early dip on profit booking, with Fed in

MUMBAI, April 29 (Reuters) – Indian government bond
yields turned higher after an early dip on Monday, as traders
booked profit after a decline in the previous session, with the
focus shifting to the Federal Reserve’s monetary policy
decision.

The benchmark 10-year bond yield was at
7.1990% as of 10:00 a.m. IST following its previous close at
7.1870%. Earlier in the day, it had eased to 7.1751%.

Indian bond yields declined last week, after rising for the
first three weeks of the new fiscal year, as strong demand at
the weekly debt auction aided sentiment.

“Yields had come off after the auction went through
smoothly, which has pushed yields down. But since we have the
Fed policy this week, traders do not want to go heavy as a
negative surprise is possible,” a trader with a private bank
said.

The Fed is expected to hold interest rates steady at the end
of its two-day policy meeting on Wednesday, but traders will
scrutinise the commentary and guidance on inflation, which will
shape the trajectory of interest rates over the coming months.

Investors are now pricing in the possibility of around 35
basis points (bps) of rate cuts by the Fed this year, compared
to over 150 bps at the start of 2024, with the first cut likely
in September or November, according to CME’s FedWatch Tool.

U.S. yields eased on Friday after data showed a key
inflation gauge was largely in line with expectations.

The personal consumption expenditures (PCE) price index
increased 0.3% last month and 2.7% annually, compared with
economists’ expectations of a 0.3% increase on-month and 2.6%
year-on-year.

Meanwhile, the benchmark Brent crude contract eased in Asian
hours as Israel-Hamas peace talks in Cairo calmed fears of a
wider conflict in the Middle East, which could have raised
uncertainties over supply.
(Reporting by Dharamraj Dhutia; Editing by Savio D’Souza)