By Dharamraj Dhutia
MUMBAI, Dec 12 (Reuters) – Indian government bond yields dipped in early trade on Tuesday, while market participants looked for directional cues from inflation prints in India and the United States and the Federal Reserve’s policy decision.
The 10-year benchmark bond yield IN071833G=CC was at 7.2687% as of 10:00 a.m. IST, after ending the previous session at 7.2829%.
“There is some move as the benchmark yield was around the upper end of the narrow trading range, but any major move will happen only after the inflation data as well as the Fed commentary,” a trader with a private bank said.
India’s retail inflation likely picked up in November due to higher food prices after declining for three months, bringing it closer to the upper end of the Reserve Bank of India’s (RBI) 2%-6% target range, a Reuters poll found.
The poll predicted inflation rising at an annual rate of 5.70% in November, faster than 4.87% in October.
The Reserve Bank of India, while maintaining the status quo on rates and its policy stance last week, had sounded cautious on inflation.
In the U.S., headline prices are expected to have risen 0.1% in November on-month, for an annual gain of 3.1%. USCPNY=ECI
The inflation data would be followed by the Fed policy decision on Wednesday. Markets have priced in no change in rates for this policy, while they will look at the Fed’s commentary for the timing of rate cuts, which is largely expected in the first half of 2024.
The odds of such an action in March is around 45%, while that for May stands around 76%, down from the previous week, after strong jobs data alleviated recession concerns. FEDWATCH
Meanwhile, Indian states will raise 121 billion Indian rupees ($1.45 billion) later in the day, and New Delhi will raise 330 billion rupees on Friday. This includes 160 billion rupees of the benchmark note, higher than the 130 billion rupees that have been sold so far.
($1 = 83.3470 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman)
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