India bond yields seen rising, mirroring US peers
By Dharamraj Dhutia
MUMBAI, Dec 16 (Reuters) -Indian government bonds are expected to start the week with an upward bias, tracking an uptick in U.S. Treasury yields, while the focus would remain on the Federal Reserve's monetary policy decision this week.
The benchmark 10-year yield IN067934G=CC is likely to move between 6.71% and 6.75% on Monday, a trader with a private bank said, compared with its previous close of 6.7282%.
"The theme for the week is the Fed policy decision, and there is nervousness that the Fed may hint at a pause in rates for the next year, which has led to some sell-off in Treasuries, and could put pressure on local bonds," the trader said.
U.S. yields rose on Friday, with the 10-year yield hitting its highest in three weeks. The yield stayed around the 4.40% mark in Asia trade on Monday, as investors remain worried about the U.S. rate easing cycle in 2025.
The rise comes after U.S. November inflation data was in line with estimates, cementing a rate cut by the Fed later this week, but making the outlook for the next year murky.
Even though policymakers have stated that recent uptick in price pressures are part of the bumpy path to lower inflation and not a reversal of the disinflationary trend, analysts expect the Fed to be wary of renewed higher price pressures with President-elect Donald Trump set to take office from January.
The U.S. central bank, which has cut interest rates by 75 basis points since September, will announce its decision after Indian market hours on Wednesday.
Meanwhile, India's retail inflation eased to 5.48% in November from a 14-month high of 6.21% in October, raising bets of a rate cut from the Reserve Bank of India (RBI) in February.
The minutes of the RBI's December meeting are due by end of this week and will provide more clarity on policymakers' thinking about the interest rate trajectory.
KEY INDICATORS:
** Brent crude futures LCOc1 0.2% lower at $74.30, after rising 1.5% in the previous session
** Ten-year U.S. Treasury yield US10YT=RR was at 4.3908%; two-year yield US2YT=RR was at 4.2427%
Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala
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