By Dharamraj Dhutia
MUMBAI, Dec 12 (Reuters) – Indian government bond yields are likely to remain largely unchanged in early Tuesday trading as market participants await inflation prints from India, as well as the United States.
The 10-year benchmark bond yield IN071833G=CC is expected to be between 7.26% and 7.30%, after ending the previous session at 7.2829%, a trader with a state-run bank said.
“We are unlikely to see any major move on either side before the inflation data,” the trader said. “The major trigger would be the Federal Reserve policy decision and commentary about the aggressive pricing of rate cuts in the market.”
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 rose at an annual rate of 5.70% in November, faster than 4.87% in October.
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 and investors will focus on the Fed’s commentary for the timing of rate cuts, 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. FEDWATCH
Declining inflation is likely to provide the Fed some leeway in reducing rates, but the timing and magnitude of rate cuts also hinges heavily on how fast the labour market deteriorates, DBS said.
“We reiterate our view that rate cuts are more likely towards mid-2024, rather than the start of 2024.”
KEY INDICATORS:
** Brent crude futures LCOc1 0.1% higher at $76.15 per barrel, after rising 0.3% in previous session
** The 10-year U.S. Treasury yield US10YT=RR at 4.2313%, two-year yield US2YT=RR at 4.7164% ** Eight states to raise 121 billion rupees ($1.45 billion) via sale of bonds
($1 = 83.3560 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Nivedita Bhattacharjee)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.