MUMBAI, July 12 (Reuters) – Indian government bond
yields trended marginally down on Friday ahead of fresh supply
via a debt auction, even as U.S. yields declined sharply, as
softening inflationary pressures raised bets of interest rate
cuts.
The benchmark 10-year yield was at 6.9746% as
of 10:00 a.m. IST, having closed at 6.9832% in the previous
session.
“As expected, bonds are seeing offers lined up, and hence
benchmark yield is even unable to break the key level of 6.98%
convincingly. We do not expect any major move today,” a trader
with a primary dealership said.
New Delhi will raise 220 billion rupees ($2.63 billion) via
the sale of bonds, which includes the 7-year and 40-year bonds.
U.S. yields dropped, with the 10-year yield
touching a four-month low on Thursday. However, it pared some of
its fall in Asian hours on Friday.
The U.S. consumer price index (CPI) dipped 0.1% last month
after being unchanged in May. For the 12 months through June,
the CPI rose 3.0%, following a 3.3% gain in May.
A Reuters poll had estimated inflation to rise 0.1%
month-on-month, and 3.1% for 12 months to June.
The latest data has led to a repricing of interest rate cut
expectations, with the probability of a 25-basis-point rate cut
by the Federal Reserve in September jumping to 93% from around
75% before the inflation data.
Chances of a 75 bps cut in 2024 have risen to 46%, up from
27%, according to the CME FedWatch Tool.
With Fed officials apparently getting a little more nervous
about labour market weakness, it strengthens the case for a
September rate cut, said Capital Economics.
Market also awaits local retail inflation data due later in
the day. A Reuters poll predicted retail inflation to edge up to
4.80% in June, snapping five months of declines, largely because
of a jump in vegetable prices and against 4.75% in May.
($1 = 83.5175 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman
)