Indian government bond yields are likely to rise in the early session on the last day of the quarter, tracking a spike in U.S yields, while a fresh supply of debt via weekly auction will further hurt sentiment. The benchmark 7.26% 2033 bond yield is expected to be in the 7.04%-7.10% range, after closing at 7.0575% in the previous session, a trader with a primary dealership said.
The sharp jump in U.S. yields will have a spillover impact on local papers, and to add to it, supply will also test appetite, the trader said. “Benchmark yield may break its technical upside-level through the day. “U.S. yields jumped on Thursday after upbeat data solidified the picture of an economy and job market defying predictions of a recession, underpinning pronouncements from the Federal Reserve chief that there is little room to let up on monetary tightening.
U.S. weekly claims for unemployment insurance came in at 239,000, below the 265,000 expected and below last week’s revised 265,000 jobless claims filed. At the same time, the final print for first-quarter gross domestic product growth was 2.0%, higher than last month’s 1.3% reading, and the 1.4% forecast by economists polled by Reuters.
The 10-year yield rose above the crucial 3.85% mark, while the two-year yield, a closer indicator of interest rate expectations, jumped 16 basis points to 4.88% as bets of interest rate hikes from the Fed rose. The odds of a rate hike in July stand surged to around 84% from 74% earlier in the week. Meanwhile, New Delhi will raise 330 billion Indian rupees ($4.02 billion) through the sale of bonds, which includes 140 billion rupees of the benchmark note.
Bond yields remained largely range-bound through the week, as traders continue to seek fresh triggers, and await the new quarter to reassess their portfolios.