MUMBAI, Aug 14 (Reuters) – Indian government bond yields
are expected to dip in opening trades on Wednesday, tracking
U.S. peers after benign producer price data looked unlikely to
divert the Federal Reserve from an easing glide path.
The benchmark 10-year yield is likely to move
between 6.85% and 6.89%, compared to its previous close of
6.8786%, a trader with a primary dealership said. Indian
financial markets will be closed on Thursday for Independence
Day.
U.S. bond yields eased on Tuesday after the July Producer
Price Index increased a less-than-expected 0.1%, after rising
0.2% in June, as a rise in the cost of goods was tempered by
cheaper services.
The focus, however, has turned to the U.S. CPI print due
later in the day to fill out the inflation picture.
Slowing inflation and a cooling labour market have led
financial markets to anticipate the Federal Reserve will start
its easing cycle in September.
India’s retail inflation eased in July due to vegetable
inflation falling and a high base effect. The annual retail
inflation was 3.54% in July, lowest since August 2019, and down
from 5.08% in June.
This, along with upcoming U.S. CPI data may continue the
positive momentum in the debt market, Murthy Nagarajan, fixed
income head at Tata Asset Management said.
Futures markets reflect odds of about 54% that the Fed will
cut 50 basis points in September against 46% for a 25 bps cut.
Traders are pricing in a full percentage point of easing by
year-end.
KEY INDICATORS:
** Brent crude futures were 0.4% higher at $81.13 per
barrel, after falling 1.6% in the previous session
** Ten-year U.S. Treasury yield at 3.8522%, two-year
yield at 3.9460%
** RBI to auction treasury bills worth 200 billion rupees ($2.4
billion)
($1 = 83.9100 Indian rupees)
(Reporting by Bhakti Tambe; Editing by Mrigank Dhaniwala)