Indian government bond yields trended marginally lower in early trading on Monday as the focus shifted to local as well as U.S. inflation prints due this week, while state debt supply undershot estimates yet again. India’s benchmark 10-year yield was at 7.0939% as of 10:00 a.m. IST, following its previous close of 7.1067%. The yield rose 5 basis points (bps) last week, the most since the week ended Jan. 5.
Indian states aim to raise 175 billion rupees ($2.11 billion) through the sale of bonds on Tuesday, lower than 369.60 billion rupees as per schedule. “Some correction was bound to happen as Friday’s selloff was without any major trigger, and with state debt supply lower than calendar again, there is some bullish bias today,” the trader said.
India’s retail inflation likely eased to a three-month low of 5.09% in January on slowing food price rises and favourable base effects, according to economists polled by Reuters who also predicted a moderation in core inflation to 3.70%.Inflation stood at 5.69% in December, while core inflation had eased to a four-year low of around 3.80%, according to economists. The government does not release core inflation figures.
Last week, the Reserve Bank of India kept policy rates and stance unchanged without providing any major dovish guidance, while reiterating its commitment to meet the medium-term 4% inflation target.
“The last mile of disinflation is always the most challenging and that has to be kept in mind,” RBI Governor Shaktikanta Das had said. Meanwhile, U.S. yields stayed elevated before the key inflation print on Tuesday, which will provide the next clues on when the Federal Reserve is likely to begin cutting interest rates.
The 10-year yield was around the 4.20% handle, with the odds for a rate cut in March remaining around 17% and that for such an action in May around 63%, down from over 97% last month.
