India bond yields inch up tracking US peers; state debt sale eyed
By Bhakti Tambe
MUMBAI, Sept 2 (Reuters) -Indian government bond yields ended higher on Monday, tracking U.S. peers, after key data from the world's largest economy made traders bet that the Federal Reserve would only opt for a small rate cut in its September meeting.
The benchmark 10-year yield IN071034G=CC ended at 6.8754%compared with its previous close of 6.8647%.
"The 10-year bond yield is stuck in 6.85-6.88% zone for the last few sessions and we will see some movement only after Fed policy this month," Yogesh Kalinge, associate director at A.K. Capital Services.
U.S. Treasury yields rose on Friday after the Commerce Department said personal consumption expenditure (PCE) price index rose 0.2% in July, matching expectations of economists polled by Reuters, after an unrevised 0.1% gain in June.
The 10-year U.S. Treasury yield US10YT=RR was higher at 3.91% in Asian hours.
"The U.S. jobs data due this week will be key in deciding the size of Fed rate and will also act as a major trigger for markets," A.K.'s Kalinge said.
Fed Chair Powell had last month signaled a shift in the Fed's focus towards the job market.
Markets are fully pricing in a rate cut of at least 25 basis points at the Fed's mid-September meeting. Expectations for a 50 basis point cut dipped to 30.5% after the PCE data from 34% in the prior session, according to CME's FedWatch Tool. FEDWATCH
In India, Nomura expects the Reserve Bank of India to begin cutting interest rates next month as inflation in the South Asian nation edges lower and economic growth weakens.
India's economic growth slowed to 6.7% year-on-year in the April-June quarter as a decline in government spending during national elections weighed, data showed on Friday, but it remained the world's fastest-growing major economy.
Market participants also await Tuesday's weekly auction, where 11 states aim to raise 205.5 billion rupees ($2.45 billion) via sale of bonds.
($1 = 83.8990 Indian rupees)
Reporting by Bhakti Tambe; Editing by Nivedita Bhattacharjee
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