Indian Bonds Yields Follow US
Indian government bond yields ended slightly higher on Wednesday, as the benchmark yield surpassed the 7% threshold, mirroring a similar movement in U.S. Treasury yields. The 10-year yield closed at 7.0129%, up from its previous close of 6.9956%.
Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank, noted, “Indian Bonds yields moved higher tracking Treasuries, but we should see some consolidation around 7%, ahead of multiple events that are lined up in the coming days.” In the U.S., yields rose, with the 10-year yield climbing above 4.55%, amid uncertainty regarding the timing and extent of rate cuts by the Federal Reserve in 2024.
Indian Bonds
The futures market indicates only about 34 basis points (bps) of rate cuts this year, compared to over 50 bps earlier in the month, according to the CME FedWatch Tool. Nevertheless, optimism about the government’s strong fiscal position, particularly after the Reserve Bank of India’s record surplus transfer earlier in the month, continued to support investor sentiment. Some market participants anticipate further reductions in borrowings, despite New Delhi already lowering the supply of Treasury bills until the end of June. On Thursday, the government plans to buy back bonds maturing within this financial year, amounting to 400 billion rupees ($4.80 billion), following securities worth Rs 17,900 crore repurchased so far in May.
Traders are also keeping an eye on fresh debt sales along with India’s growth rate data for the financial year 2024, both scheduled for Friday. These developments precede general election results on June 4. The RBI’s monetary policy decision is slated for June 7, with analysts anticipating a status quo. Meanwhile, Indian bonds market showed muted reaction to S&P Global Ratings raising India’s sovereign rating outlook to ‘positive’ from ‘stable,’ while maintaining the rating at ‘BBB-‘.
