Indian bond yields track US peers higher; Fed meet in focus
By Dharamraj Dhutia
MUMBAI, Dec 16 (Reuters) -Indian government bond yields reversed the previous session's declines to end higher on Monday, following a spike in U.S. Treasury yields, while major focus was on the Federal Reserve's monetary policy decision due this week.
The benchmark 10-year yield IN067934G=CC ended at 6.7430%, compared with its previous close of 6.7282%.
"Benchmark bond yield may trade close to the upside resistance level of 6.74%-6.75% for the next couple of days," a trader with a private bank said.
U.S. yields rose on Friday and stayed elevated in Asian hours on Monday, with the 10-year yield US10YT=RR hitting its highest level in three weeks. The yield was around 4.40%.
Treasury yields rose after U.S. November inflation data came in line with estimates, cementing a rate cut by the Fed on Wednesday but making the outlook for the next year uncertain.
The odds of a 25-basis-point rate cut this week have jumped to over 97%, while the odds of a cut in January are at just 17%, according to the CME FedWatch Tool. FEDWATCH
The U.S. central bank has cut interest rates by 75 bps since September, and analysts are expecting the Fed to turn cautious once the new administration takes over in January.
"Elevated U.S. bond yields on fear of higher inflation and the posturing by the incoming U.S. administration has pressured emerging market currencies and bond yields, and we believe that this may continue over the next quarter," said Puneet Pal, head of fixed income at PGIM India Mutual Fund.
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 in February.
The minutes of the RBI's December meeting will be released on Friday and may provide more clarity on policymakers' thinking about the interest rate trajectory.
At its last meeting, the RBI maintained the status quo on rates but infused liquidity through a cut in banks' cash reserve ratio.
Reporting by Dharamraj Dhutia
Editing by Eileen Soreng
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