India bond yields seen marginally lower as Fed rate cut bets improve

MUMBAI, – Indian government bond yields are expected to trend lower in early trading on Wednesday, tracking a fall in U.S. Treasury yields amid rising prospects of a deeper interest rate cut next month.

The benchmark 10-year yield is likely to move between 6.84% and 6.88%, compared to its previous close of 6.8561%, a trader with a primary dealership said.

“The odds of a larger than 25 basis point cut by the Federal Reserve have again improved, but Indian bond yields should show only some muted reaction, with the benchmark finding a strong base in 6.84%-6.85% levels,” the trader said.

U.S. Treasury yields fell on Tuesday as investors braced for the minutes of the Federal Reserve’s latest monetary policy meeting, and Chair Jerome Powell’s remarks on Friday in Jackson Hole, Wyoming.

The 10-year Treasury yield eased to 3.80%, its lowest level in two months, while the two-year yield inched below the 4% mark.

The odds of a 50 basis points cut by the Fed in September have risen to 33%, after traders had completely ruled out such a move on Tuesday.

The odds of a 25 bps move stand at 67%, while expectations of the total quantum of cuts in 2024 have again firmed up to 100 bps.

The Fed held interest rates steady in July, and minutes of this meeting are due to be released after Indian market hours.

Focus will also remain on the minutes of the Reserve Bank of India’s August meeting, at which it held rates and policy stance, due on Thursday.

While most central banks are poised to ease policy rates, the RBI is focussed on taming food price-led inflation. India’s retail inflation fell to a near five-year low of 3.54% in July due to a base effect, suggesting slower pace is temporary. KEY INDICATORS:

** Brent crude futures were 0.2% down at $77.10 per barrel, after falling 0.6% in the previous session

** Ten-year U.S. Treasury yield at 3.8067%, two-year yield at 3.9899%

** RBI to auction treasury bills worth 200 billion rupees

This article was generated from an automated news agency feed without modifications to text.