On Monday, the yields on Indian government bonds increased slightly, following the increase in U.S. Treasury yields. However, dealers do not anticipate that the benchmark 10-year yield would surpass 7.25%.
As of 10:00 a.m. IST, the benchmark bond’s yield was 7.2301%, down from its previous close of 7.2278%. It reached a four-month high of 7.2447% earlier in the day.
There was an attempt to surpass the critical level of 7.25% at opening, but since that has been protected, we are likely to see rangebound moves in bond yields, with focus on Treasuries,” a trader at a government-owned bank stated.
The 10-year yield crossed the 4.65% barrier in Asian trading as U.S. Treasury yields increased as demand for safe haven assets decreased.
Since Federal Reserve officials have stated that they do not believe there is an urgent need to lower rates given the strength of the U.S. economy, U.S. yields have increased significantly, with the 10-year up more than 45 basis points this month.
Regarding the quantity and timing of US rate cuts in 2024, investors have lowered their forecasts.
Compared to nearly 150 basis points (bps) at the beginning of the year, futures are now pricing the probability of less than 40 bps of reduction by the end of this year, according to CME’s FedWatch Tool.
The minutes of the central bank’s most recent monetary policy meeting in India gave bulls little hope since they emphasised the importance of achieving the 4% inflation objective.
According to a note from Nomura, the rate-setting panel is being unduly cautious.
Although supply-side risks will always exist, the rapid decline in core momentum and the lack of second-round impacts may indicate that policy rates are too stringent, the report continued.
As Israel and Iran downplayed the possibility of hostilities escalating, oil prices also decreased from their previous highs.
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