The yields on Indian government debt are expected to slightly ease at the start of the week as both oil prices and US Treasury yields decline from their recent highs. All eyes are still focused on the Federal Reserve’s next decisions about its interest rate policy, though.
The benchmark 10-year Indian yield is anticipated to move between 7.16 and 7.21 percent after closing at 7.1870 percent last time, an economist from a primary dealers said. The trader reported strong demand during Friday’s auction, and prompted follow-up purchases in the aftermarket. It is anticipated that this trend will keep going, helped by the little reduction in Treasury yields and oil prices. However, the benchmark will probably continue to stay between 7.15 and 7.16 percent.
Friday saw an improvement in US increases as data indicated that a crucial inflation gauge was within forecast bounds. The Personal Consumption Expenditures (PCE) price index increased by 2.7% yearly and by 0.3% within the past month. Despite the fact that the US rate-cutting predictions were not very much affected by this data, the Federal Reserve is expected to remain cautious when making its lending rate decision on Friday.
According to market specialists and CME’s FedWatch Tool, investors are now pricing in a probability of 34 basis points (bps) of rate cuts by the Fed in 2024, down from the over 150 bps expected at the start of the year.
Furthermore, during Asian trading hours on Monday, the benchmark Brent crude oil contract saw lower prices as hopes for a wider Middle East conflict were allayed by peace talks between both sides in Cairo. This could have led to greater supply concerns.
Indian bond yields saw a decline last week following a three-week increase in the first quarter of the current financial year, which began in April. The weekly debt auction saw strong demand, which reinforced traders’ expectation that rates would peak at these levels.
In conclusion, the spotlight is still focused on the Federal Reserve’s monetary policy decision and its effects on global markets, even though Indian bond yields are predicted to modestly decline at the start of the week.
