India bond yields likely to track US peers lower
By Bhakti Tambe
MUMBAI, July 8 (Reuters) -Indian government bond yields are expected to dip at the open on Monday, tracking a decline in their U.S. peers after jobs data showing a slackening labour market boosted expectations that the Federal Reserve will begin to lower interest rates in September.
The benchmark 10-year yield IN071034G=CC is likely to move in the 6.98%-7.03% range, following its previous close at 6.9926%, a trader with a primary dealership said.
U.S. yields declined after data showed nonfarm payrolls grew by a slightly higher-than-expected 206,000 jobs in June, but the count for April and May was revised lower by 111,000, suggesting the trend in payrolls growth was slowing.
The labour market has been a key focus for Fed policymakers in their debate over when to begin cutting rates as they fear a resilient job market could reignite inflation.
After the latest data, though, the odds of a 25-basis-points rate cut in September jumped to roughly 73% chance from 58% a week ago, according to CME Group's FedWatch tool.
Back home, the newly elected Indian government will present its first union budget on July 23, which will be the next key trigger for the bond market.
"Fiscal consolidation path will be adhered to in the budget, but spending will be higher on the revenue side, balancing income support and growth support," said Anitha Rangan, an economist at Equirus Group.
"Capex cannot be sacrificed at the expense of consolidation. The interim budget already gave a stamp of growth focus, the final budget is likely to enhance it further. The trinity of capex, consolidation and growth will be watched for."
KEY INDICATORS:
** Brent crude futures LCOc1 were 0.2% lower at $86.33 per barrel, after falling 1% in previous session
** Ten-year U.S. Treasury yield US10YT=RR at 4.3018%, two-year yield US2YT=RR at 4.6244%
Reporting by Bhakti Tambe; Editing by Savio D'Souza
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