Indian bond yields seen flattish as hunt for triggers continues
By Dharamraj Dhutia
MUMBAI, Nov 19 (Reuters) -Indian government bond yields are expected to trade largely unchanged on Tuesday ahead of a holiday and as traders continue to await fresh triggers locally and globally.
The benchmark 10-year bond yield IN067934G=CC is likely to move between 6.79% and 6.83%, compared with the previous close of 6.8181%, according to a trader with a state-run bank.
Indian markets are shut on Wednesday for a regional election.
"Market participants are looking for cues, which, at the moment, are not available and for the week, we do not expect any major move in rates or pick up in volumes," the trader said.
Bond yields witnessed an uptick recently as U.S. Treasury yields stayed higher on easing bets of an interest rate cut by the Federal Reserve next month. The odds of a Fed rate reduction in December had risen after last week's inflation reading came in line with estimates.
However, traders have now assigned only a 58% chance of a Fed rate cut next month, down from 77% last month, according to the CME FedWatch tool, following Donald Trump's Presidential election win as his policies are expected to raise inflation as well as fiscal deficit.
Elevated inflation reading in India in which consumer prices accelerated to 6.21% in October, breaching the Reserve Bank of India's target range of 2%-6% for the first time in 14 months has also weighed on sentiment.
Most market participants are not expecting the authority to cut rates in December, while swap markets have priced out the February rate cut as well.
Still, any rise in yields is unlikely as demand-supply conditions remain favourable, with states set to borrow 93.49 billion rupees ($1.11 billion), sharply lower than the target of 297.38 billion rupees, via the sale of bonds. This is the fifth consecutive week that states will borrow lower-than-earmarked amounts through debt sales.
KEY INDICATORS:
** Brent crude futures LCOc1 up 0.2% at $73.45 per barrel, after rising 3.2% in the previous session
** Ten-year U.S. Treasury yield US10YT=RR was at 4.4119%; two-year yield US2YT=RR was at 4.2759%
** Six Indian states to raise 93.49 billion rupees via sale of bonds
($1 = 84.3860 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman
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