Indian bond yields seen higher tracking US peers, sentiment remains weak

Published Mon, Aug 8, 2022 · 11:51 AM

INDIAN government bond yields are expected to trade higher in opening deals on Monday (Aug 8), extending gains fuelled by the central bank's interest rate hike and hawkish commentary on Friday, and tracking a spike in US Treasury yields.

The yield on the 10-year benchmark bond is likely to trade in a 7.32-7.38 per cent band, a trader with a private bank said. It closed 14 basis points higher at 7.3005 per cent on Friday, posting the biggest single-day rise in 3 months.

"Sentiment has already weakened after the hawkish monetary policy decision as well as commentary, and higher US yields will further breed selling pressure," the trader said.

The Reserve Bank of India raised the key lending rate, or repo rate, by 50 basis points on Friday, the third increase in the current cycle, to cool stubbornly high inflation that has remained above its tolerance band for 6 straight months.

US Treasury yields rose on Friday, with the 10-year yield climbing 16 basis points to end at 2.8400 per cent, its biggest such move in nearly 2 months, after strong US non-farm payroll data.

The US Treasury yield curve has inverted by as much as 45 bps after the data, as the market has started expecting another 75-bp hike from the Federal Reserve in September.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

VIEW ALL

Meanwhile, market participants will await results of a state debt auction to gauge investor appetite. Indian states will seek to raise 138 billion rupees (S$2.4 billion) in the auction. A weekly auction of central government bonds saw weak demand and higher-than-expected cut-off yields on Friday.

Indian markets will be closed on Tuesday for a local holiday. REUTERS

KEYWORDS IN THIS ARTICLE

READ MORE

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to  t.me/BizTimes

International

SUPPORT SOUTH-EAST ASIA'S LEADING FINANCIAL DAILY

Get the latest coverage and full access to all BT premium content.

SUBSCRIBE NOW

Browse corporate subscription here