MUMBAI, Nov 4 (Reuters) – Indian government bond yields
are expected to trend higher in early trades on Friday, ahead of
fresh supply through debt auction, while elevated U.S. yields
will continue to weigh on investor appetite.
The benchmark 10-year yield is likely to be
in a 7.47%-7.53% band, a trader with a private bank said. The
yield ended eight basis points higher at 7.4829% on Thursday and
also posted its biggest single-session rise since Oct. 6.
“After the Federal Reserve policy meeting, sentiment has
turned cautious, and we may see continuation of yesterday’s
selling pressure at least till the auction bidding today,” the
trader said.
New Delhi will raise 300 billion Indian rupees ($3.63
billion) through sale of bonds, which includes liquid five-year
and 14-year bonds later in the day.
The 10-year U.S. yield was trading above 4.15%, while the
two-year yield which is a more direct indicator of interest rate
expectations, was above 4.70%, its highest level in over 15
years.
On Wednesday, the Fed raised interest rates by 75 basis
points, and said its battle against inflation will require
borrowing costs to rise further.
Chair Jerome Powell had said the “ultimate level” of the
U.S. central bank’s policy rate would likely be higher than
previously estimated and there is some ground to cover to reach
a “sufficiently restrictive” level that will slow inflation.
The Reserve Bank of India’s Monetary Policy Committee met on
Thursday to discuss the bank’s report to the government, for
having failed to meet its inflation targets for three straight
quarters for the first time since it was set up in 2016.
The committee is mandated to keep inflation within 2
percentage points on either side of its 4% target, and a miss
for three quarters requires it to provide an explanation to the
government, along with the recourse it plans to adopt.
India’s retail inflation has remained above 6% since January
and accelerated in September to a five-month high of 7.41%
year-on-year as food prices surged.
KEY INDICATORS:
** Brent crude futures was 0.4% higher at $95.10 per
barrel, after easing 1.6% in previous session
** 10-year U.S. Treasury yield was at 4.1151% and
the two-year note at 4.6301%
** RBI to set underwriting fees for 300 billion rupees weekly
bond auction
** India to sell federal government bonds worth 300 billion
rupees
** RBI to conduct 14-day variable rate reverse repo auction for
1.50 trillion rupees
($1 = 82.6770 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Rashmi Aich)
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