India bond yields seen easing on rising bets of big Fed rate cut
By Dharamraj Dhutia
MUMBAI, Sept 17 (Reuters) -Indian government bond yields are expected to open lower on Tuesday, as odds of a larger rate cut from the Federal Reserve on Wednesday continue to rise.
The benchmark 10-year yield IN071034G=CC is likely to move between 6.75% and 6.78%, compared with its previous close of 6.7613%, the lowest since February 25, 2022, a trader with a primary dealership said.
Indian debt markets are closed on Wednesday, with the Fed decision due late in the evening. The decision would also be accompanied by updated economic projections, the dot plot and commentary from Chair Jerome Powell via a media conference.
"It has now boiled down to the quantum of rate cut tomorrow, and also the prediction for the next two meetings in November and December. If they cut by 50 bps tomorrow, and hint at another 75 bps cut in 2024, we could see a further decline in yields," the trader said.
U.S. yields continued to remain benign as the possibility of a supersized cut has been gaining ground. The probability of a 50 bps move has jumped nearly five times to 67%, within a matter of a few days up from just 14% in the previous week, with aggregate cuts of 119 bps now expected in 2024. FEDWATCH
Traders anticipate a larger rate cut from the Fed could also encourage the Reserve Bank of India to start policy easing sooner-than-anticipated.
Local sentiment also supported after the RBI cancelled treasury bill auctions due in September, which would help banking system liquidity conditions around the quarter-end.
Traders will also focus on debt supply on Friday as New Delhi will raise 310 billion rupees ($3.70 billion), which includes 200 billion rupees of the benchmark paper.
KEY INDICATORS:
** Brent crude futures LCOc1 were 0.6% up at $73.05 per barrel, after rising 1.4% in previous session
** Ten-year U.S. Treasury yield US10YT=RR at 3.6232%, two-year yield US2YT=RR at 3.5571%
** Eight Indian states to raise 135 billion rupees via sale of bonds
** RBI to conduct three-day variable rate repo for 1 trillion rupees
($1 = 83.8710 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Nivedita Bhattacharjee
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
