INDIA BONDS-Indian bond yields seen rising as US peers jump; state debt sale

MUMBAI, Aug 14 (Reuters) – Indian government bond yields
are expected to rise in early session on Monday, tracking an
upward move in U.S. yields, while the focus will remain on the
state debt auction later in the day for further cues on demand.

The benchmark 7.26% 2033 bond yield is likely
to be in the 7.18%-7.24% range, after ending the previous
session at 7.2021%, a trader with a primary dealership bank
said.

“The benchmark yield will follow U.S. peers in early trade
but may trade in a narrow range during the day as traders are
unlikely to build heavy positions in a holiday-truncated week,”
the trader said.

India’s fixed income markets will be shut on Tuesday and
Wednesday due to local holidays.

U.S. yields rose on Friday after producer price inflation
came in hotter than expected. Traders fear that the resurgence
in price pressures could increase chances that the Federal
Reserve will need to continue hiking rates.

Market participants will also await domestic inflation data,
due later in the day. India’s retail inflation likely
accelerated to 6.40% in July on surging food prices, as per a
Reuters poll.

The Reserve Bank of India (RBI) raised its inflation
forecast for the quarter and the financial year on Thursday and
held its key lending rate steady at 6.50% for the third straight
meeting.

“By doing a ‘temporary’ liquidity swipe, RBI has done a
quasi-rate hike of a smaller quantum, but nevertheless something
to tackle rising inflation,” said Anitha Rangan, economist at
Equirus Group.

“In all likelihood, if inflation turns stickier on the food
side, then the measure could be supplemented with a rate action
as well.”
KEY INDICATORS:
** Brent crude futures was 0.2% lower at $86.62 per
barrel, after rising 0.4% in previous session
** 10-year U.S. Treasury yield at 4.1796%, two-year
yield at 4.9201%
** Nine Indian states aim to raise 132 billion rupees ($1.59
billion) through the sale of bonds

($1 = 82.8740 Indian rupees)
(Reporting by Bhakti Tambe; Editing by Sonia Cheema)