Mumbai: government bond yield Trading was largely unchanged in Tuesday’s early session as local retail inflation remained above the central bank’s target, strengthening bets of another hike in policy rates next month.
Profit booking and higher sovereign debt supply also offset the impact of further decline in US yields.
The benchmark 10-year 7.26% 2032 bond yield was at 7.3512% at 10:00 am IST, after closing at 7.3579% on Monday. The yield posted its biggest one-session fall since October 4.
“The focus is back on local inflation and another possible rate hike,” said a trader with a private bank.
India’s retail inflation eased to 6.44% in February but remained above the central bank’s target, underscoring conditions that the Reserve Bank of India will raise rates in April. core inflation According to economists also remained above 6%.
“Headline inflation above 6% and sticky core CPI (Consumer Price Index) will prompt most members of the MPC (Monetary Policy Committee) to opt for a 25 bps rate hike in April,” Citi Research said.
RBI has increased the repo rate by 250 basis points to 6.50% in this financial year.
The states aim to raise 322.33 billion rupees ($3.91 billion) through bond sales, about 60 billion rupees more than the planned outlay.
Meanwhile, US yields fell further on Monday due to the collapse of a Silicon Valley bank, prompting investors to largely dampen expectations of a big Federal Reserve rate hike next week and seek the safety of government debt.
The two-year yield, a close indicator of interest rate expectations, fell 56 basis points (bps), its biggest single-session decline since October 1987. The two-year yield fell over 100 bps in three sessions to 4.10% by Monday. ,
The 10-year US yield fell 18 bps on Monday and was trading at 3.57%, down 46 bps in the last three sessions. Traders now await US inflation data later in the day.
Fed funds futures are now pricing in more than 70% probability for a 25-bps hike in March and 30% for the status quo. Last week the probability of a 50-bps increase had increased to 68%.
Profit booking and higher sovereign debt supply also offset the impact of further decline in US yields.
The benchmark 10-year 7.26% 2032 bond yield was at 7.3512% at 10:00 am IST, after closing at 7.3579% on Monday. The yield posted its biggest one-session fall since October 4.
“The focus is back on local inflation and another possible rate hike,” said a trader with a private bank.
India’s retail inflation eased to 6.44% in February but remained above the central bank’s target, underscoring conditions that the Reserve Bank of India will raise rates in April. core inflation According to economists also remained above 6%.
“Headline inflation above 6% and sticky core CPI (Consumer Price Index) will prompt most members of the MPC (Monetary Policy Committee) to opt for a 25 bps rate hike in April,” Citi Research said.
RBI has increased the repo rate by 250 basis points to 6.50% in this financial year.
The states aim to raise 322.33 billion rupees ($3.91 billion) through bond sales, about 60 billion rupees more than the planned outlay.
Meanwhile, US yields fell further on Monday due to the collapse of a Silicon Valley bank, prompting investors to largely dampen expectations of a big Federal Reserve rate hike next week and seek the safety of government debt.
The two-year yield, a close indicator of interest rate expectations, fell 56 basis points (bps), its biggest single-session decline since October 1987. The two-year yield fell over 100 bps in three sessions to 4.10% by Monday. ,
The 10-year US yield fell 18 bps on Monday and was trading at 3.57%, down 46 bps in the last three sessions. Traders now await US inflation data later in the day.
Fed funds futures are now pricing in more than 70% probability for a 25-bps hike in March and 30% for the status quo. Last week the probability of a 50-bps increase had increased to 68%.
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