India bond yields seen slightly lower as US peers decline
By Dharamraj Dhutia
MUMBAI, July 4 (Reuters) -Indian government bond yields are expected to dip in opening trade on Thursday, tracking a decline in U.S. yields after weak economic data strengthened bets of interest rate cuts.
The benchmark 10-year yield IN071034G=CC is likely to move in the 6.97%-7.02% range, following its previous close of 6.9987%, a trader with a primary dealership said.
"The immediate threat of the 10-year Treasury yields breaking the 4.50% mark has been avoided for the time being, and this should support the bond bulls today," the trader said.
Still, traders are ruling out any major fall in yields ahead of debt supply on Friday, where New Delhi aims to raise 280 billion rupees ($3.35 billion).
The benchmark 10-year U.S. yield fell to 4.35% on Wednesday, as growing signs of weakness in manufacturing and the jobs market suggested the U.S. economy was slowing.
The ISM non-manufacturing index was 48.8 in June, well below the 52.5 consensus and the 53.8 level in May.
Initial claims for unemployment rose to 238,000 in the week ended June 29, slightly above expectations of 235,000, while private payrolls rose by 150,000 jobs in June, below consensus of an increase of 160,000.
Meanwhile, the minutes of Federal Reserve's June meeting showed members acknowledged economy was slowing and price pressures were diminishing, but opted to wait before committing rate cuts.
Even as the Fed had cut its forecast to 25 basis points of rate cut in 2024, investors continue to anticipate 48 bps of cuts with a 67.5% chance of easing in September, according to the CME FedWatch tool.
Back home, investors will continue to gauge the pace of foreign inflows into bonds over the next few days, after a tepid response since inclusion of debt in the JPMorgan index on June 28.
KEY INDICATORS:
** Brent crude futures LCOc1 were 0.5% lower at $86.95 per barrel, after rising 1.3% in previous session
** Ten-year U.S. Treasury yield US10YT=RR at 4.3470%, two-year yield US2YT=RR at 4.6930%
($1 = 83.4930 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Varun H K
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