India bond yields may dip on decline in US yields despite sticky inflation
By Nimesh Vora
MUMBAI, Nov 28 (Reuters) -Indian government bond yields are expected to nudge lower at open on Thursday on back of the decline in U.S. Treasury yields, despite the Federal Reserve's preferred inflation gauge indicating a potentially cautious road to the central bank cutting borrowing costs.
The benchmark 10-year bond yield IN067934G=CC is likely to move between 6.79% and 6.82% compared with its previous closing level of 6.8123%.
"Probably (yields will) nudge a bit lower at open and then should be fairly quiet. Difficult to see much desire to take it much below 6.80%," a fixed income trader at a bank said.
"That will happen, if at all, post the (India) GDP data." India September-quarter growth data is due on Friday.
The 10-year U.S. Treasury yield dropped six basis points on Wednesday to the lowest in more than three weeks, despite inflation remaining elevated, taking its week-to-date fall to 16 bps. US/
The U.S. core personal consumption expenditures (PCE) price index rose 0.3%, matching expectations. In the 12 months through October, core inflation increased 2.8%, up from 2.7% in September. The Fed's medium-term target for inflation is 2%.
The "sticky reading" will add to doubts that the Fed needs to cut interest rates in December after all, ING Bank said in a note.
"The 0.3% month-on-month reading may still be a little too high for the Fed's liking", ING said.
The interest rate futures market is currently assigning a 60% probability that the Fed will cut rates at its December meeting.
Investors expect more rate cuts in 2025, although they reckon it will slower and shallower in the wake of Donald Trump's election victory.
KEY INDICATORS:
** Brent crude futures LCOc1 little changed at $72.80; down more than 3% this week so far
** Ten-year U.S. Treasury yield US10YT=RR dropped to 4.2420% on Wednesday; two-year yield US2YT=RR declined to 4.2130%
Reporting by Nimesh Vora; Editing by Varun H K
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