Indian bonds muted ahead of domestic, US CPI data

Time of India

14 hours ago

Indian government bonds traded in a narrow range in early deals on Tuesday, as traders cautiously awaited domestic and U.S. inflation data for further clues on the
Reserve Bank of India
's rate-easing cycle.
The yield on the benchmark 10-year bond was at 6.4325% as of 10:00 a.m. IST, compared with Monday's close of 6.4398%, the highest since April 11.
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"Any upside surprise in
domestic inflation
data against estimates could trigger some selling, but focus is largely on the U.S. inflation data," a trader at a private bank said.
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Indian bonds muted ahead of domestic, US CPI data
Indian government bonds traded narrowly as investors awaited domestic and U.S. inflation data for insights into the RBI's rate-easing cycle. The 10-year bond yield stood at 6.4325%. Traders are also closely monitoring U.S. Treasury yields and state bond auctions, anticipating that inflation figures will dictate market movements.
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India's inflation print is due at 4:00 p.m. IST, with analysts expecting domestic prices to have risen at their slowest pace in eight years, at 1.76% in July.
Meanwhile, U.S. inflation data is set to be released after market hours. Economists polled by Reuters projected
U.S. core CPI
to have risen by 0.3% in July, pushing the annual rate to 3%, above the Fed's 2% target.
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Traders are factoring in an 85% chance of a Fed rate cut next month, according to the
CME FedWatch tool
.
Meanwhile, higher
U.S. Treasury yields
are dampening the mood in the domestic market, traders said.
The 10-year U.S. Treasury yield was up 1 basis point at 4.2849% in Asian hours.
Separately, Indian states will raise 84.5 billion rupees via bonds later in the day. While the lower-than-expected supply may support sentiment, traders said the inflation print will drive any significant moves.
RATES
India's
overnight index swap rates
inched lower on Tuesday, while traders awaited the U.S. inflation data for directional cues, traders said.
The one-year OIS rate was flat at 5.50% and the two-year OIS rate dipped over 1 bp to 5.4425%. The liquid five-year OIS rate was down 1 bp at 5.6650%.