Indian bond yields seen a tad up tailing US yields; bets of large Fed rate cut ebb
By Dharamraj Dhutia
MUMBAI, Oct 1 (Reuters) -Indian government bond yields are expected to trend marginally higher in early trading on Tuesday, tracking overnight gains in U.S. Treasury yields after bets of another outsized rate cut from the Federal Reserve nosedived.
However, the Indian government's surprise announcement to sell a new 10-year bond is likely to limit any major rise.
The benchmark 10-year yield IN071034G=CC is likely to move between 6.73% and 6.77%, compared with its previous close of 6.7495%, trader with a primary dealership said.
"The odds for another 50 basis point cut in November have come down, and accordingly U.S. yields have adjusted, so we could see some uptick at open," the trader said.
"Still, new 10-year bond sale should lift sentiment, and any rise will be bought into during the day."
U.S. yields rose across the board on Monday after Fed Chair Jerome Powell suggested the central bank will take a gradual approach in cutting interest rates, noting monetary policy is not on any "preset course."
If the economy evolves broadly as expected, policy will move over time towards a more neutral stance, while adding "risks are two-sided," he said.
The odds of a 50 bps cut in November dropped to 37% following Powell's comments, from 53% before. However, interest rate futures are still anticipating 70 bps of cuts in 2024, higher than the Fed's 50 bps guidance. FEDWATCH
Meanwhile, New Delhi will sell a new 10-year bond worth 220 billion rupees ($2.63 billion) on Friday, which will replace the existing benchmark paper soon.
The announcement came as a major surprise for the market as the outstanding issuance for the current 2034 benchmark bond was around 1.8 trillion rupees.
India will sell bonds worth 6.61 trillion rupees ($78.88 billion) in October-March, which is in line with budget estimates and has led to steepening in the yield curve.
KEY INDICATORS:
** Brent crude futures LCOc1 up 0.1% at $71.85 per barrel, after easing 0.3% in the previous session
** Ten-year U.S. Treasury yield US10YT=RR at 3.7752%, two-year yield US2YT=RR at 3.6288%
** Twelve Indian states to raise 199.42 billion rupees via sale of bonds
($1 = 83.7980 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Varun H K
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