Thursday, October 6

India bond yields up for fourth day in a row as inflation, US yields weigh


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MUMBAI — Indian government bond yields rose for a fourth consecutive session on Tuesday, as concerns over inflation weighed alongside higher US Treasury yields.

The benchmark 10-year government bond yield ended at 7.2811%. The yield has risen 9 basis points in last three sessions and had ended at 7.2702% on Monday. The new 10-year 7.26% 2032 bond yield closed at 7.2684% against 7.2585% on Monday.

“There are worries over inflation and that central bank will hike (rates) more, so benchmark bond yield should stabilize around 7.30% for the time being,” said Raju Sharma, head fixed income at IDBI Mutual Fund.

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Earlier on Tuesday, Reserve Bank of India Governor Shaktikanta Das in an interview to ET Now said inflation has peaked and will moderate going forward and bond yields are reflecting that trend.

Yields had briefly turned flat on-day after the comments, but selling pressure persisted leading to a rise, traders said.

Market participants remain cautious after members of the RBI’s monetary policy committee highlighted inflation concerns in minutes of a rate-setting meeting.

India’s consumer inflation dipped to 6.71% in July, easing for the third month in a row, but it stayed above the RBI’s mandated target band of 2-6% for a seventh straight month.

Earlier in August, the RBI raised the bank’s key lending rate by 50 basis points to 5.40%, its third such increase in four months, to curb rising price pressure.

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Since May, the RBI has hiked repo rate by 140 basis points.

Meanwhile, the 10-year US yield on Monday rose above 3.00% for the first time in a month, as investors expect the US Federal Reserve to reinforce its commitment to tackle inflation by hiking rates.

Fed Chair Jerome Powell is scheduled to speak at the Jackson Hole symposium on Friday, and traders are expecting him to further stress on inflation management.

The US Federal Reserve has hiked rates by 225 basis points since March, including two back-to-back 75 basis points hike in June and July. Odds of another 75 basis point rate hike by the Fed next month are also slightly higher than that of a 50 basis points increases, according to the CME FedWatch Tool. (Reporting by Dharamraj Lalit Dhutia; Editing by Neha Arora)

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