Post-Central Bank Inflation Comments, India Bond Yields Are Higher

(CTN News) – After the Reserve Bank of India’s recent inflation commentary, Indian government bond yields are expected to move slightly higher in the early session on Tuesday.

In response to the previous session’s end at 7.0758%, an investor with a primary dealership expects the benchmark yield on the 7.26% 2033 bond to range between 7.07% and 7.12% in the coming session.

It appears that there could be some reversal of yesterday’s fall in yields, as the comments from the RBI suggest they are still very cautious about inflation expectations, according to a trader.

It is still possible that range-bound moves will occur after the initial rise.”

According to the Reserve Bank of India on Monday, food price spikes in the country, which are typical at the start of the monsoon season, drove up headline inflation in June, supporting the view of the monetary policy committee (MPC) that the fight against inflation is far from over.

According to the central bank in its monthly bulletin, which is published as a part of its State of the Economy article, “There is an urgent need for monetary policy to stay the course to achieve inflation alignment with target,” the central bank said.

It has been four months since Indian retail inflation began to ease and there was no possibility of an early rate cut as the rate rose to 4.81% in June.

Despite the fact that US yields remained largely unchanged, markets have been closely monitoring Jerome Powell’s tone at the Federal Reserve’s July 25-26 meeting, where a rate hike has already been factored in, for any comments he may have concerning that rate hike.

There is a 92% chance that a 25-basis point (bps) hike will take place in July, however, the odds of another hike in the following months have declined significantly.

During the same timeframe, Indian states are planning to raise 124.30 billion rupees ($1.52 billion) through the sale of bonds later in the day, and the price is lower than what was originally planned.

There will also be a 310 billion rupees sale of bonds on Friday, which will include a new 14-year bond worth 140 billion rupees and an existing bond worth 310 billion rupees, which will also be sold.

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