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Inflation Data May Influence Indian Bond Yields, Tracking US Peers

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Inflation Data May Influence Indian Bond Yields, Tracking US Peers

(CTN News) – Despite the importance of local inflation data due late on Monday and U.S. inflation data scheduled for Tuesday, Indian bond yields may inch marginally higher early on Monday, tracking elevated U.S. yields.

The benchmark 10-year yield for India is expected to hover between 7.08% and 7.13%, following a previous close of 7.1067%. There was an increase in the yield of 5 basis points (bps) last week, which is the largest gain since the week ended January 5.

As a result of the rise in interest rates we have seen toward Friday’s close, it is possible that interest rates will rise further, but a major selloff is unlikely as traders will wait for data to determine the interest rate outlook,” said the trader.

Retail inflation in India may have moderated to a three-month low of 5.09% in January, according to economists polled by Reuters, which also predicted a moderated core rate of 3.70%.

According to economists, December’s inflation rate was 5.69%, while core inflation had eased to a four-year low of about 3.80%.

Inflation figures for core items are not released by the government.

While reiterating its commitment to meeting the medium-term 4% inflation target last week, the Reserve Bank of India kept policy rates and stance unchanged without providing any major dovish guidance.

It is always the last mile of that poses the greatest challenge, and this must be kept in mind,” RBI Governor Shaktikanta Das said.

According to Sunidhi Securities, inflation for the current financial year is forecast to be 5.33%, down from 5.43% in the previous month.

Meanwhile, U.S. yields remained elevated ahead of the key report on Tuesday, which will provide the next indication of when the Federal Reserve will begin cutting interest rates.

Ten-year yields were hovering around 4.20%, with odds of a rate cut in March remaining around 17%, while those for a rate cut in May remaining around 63%, down from over 97% last month.

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