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Bond yields seen little changed as traders await fresh triggers

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MUMBAI — Indian government bond yields are expected to trade largely unchanged on Wednesday, as traders awaited cues from U.S. inflation data and fresh supply of bonds due later in the week.

The benchmark 10-year yield is likely to be in a 7.40%-7.45% band, a trader with a private bank said. The yield ended at 7.4342% on Monday. Indian markets were shut on Tuesday for a local holiday.

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“Broadly, there is not much change in global factors, and with yields at the levels that they are, we may not see any large move until the U.S. inflation print,” the trader said.

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Data on the U.S. consumer price index (CPI) is due for release on Thursday, with economists forecasting a decline in both monthly and annual core numbers to 0.5% and 6.5%, respectively.

U.S. Treasury yields were also flat ahead of the crucial print, which could provide more clarity on future trajectory of interest rates.

The Federal Reserve has already raised interest rates by 375 basis points (bps) since March this year, including a 75 bp hike last week. Its next decision is due in mid-December.

Global oil prices were steady after the benchmark Brent crude contract eased about 3% on Tuesday on worries about demand stalling on potential new lockdowns in top oil importer China, as the country’s COVID-19 cases rebound.

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Movement in crude oil prices could impact domestic inflation, as India is one of its largest importers.

India’s retail inflation data for October is due next week. The reading has remained above 6% since January, accelerating to a five-month high of 7.41% year-on-year increase in September on surging food prices.

The Reserve Bank of India has already raised key policy rate by 190 bps since May to 5.90%, and most participants expect another 60 bp rate hike in the next few months. KEY INDICATORS: ** Brent crude futures was 1.1% lower at $97.45 per barrel, after rising 4.1% in previous session ** 10-year U.S. Treasury yield was at 4.1528% and the two-year note at 4.6695% ** Reserve Bank of India to auction Treasury Bills worth 220 billion rupees ($1 = 81.3700 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Rashmi Aich)

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