Govt bond yields marginally down ahead of fresh supply via debt auction

Indian government bond yields trended marginally down on Friday ahead of fresh supply via a debt auction, even as US yields declined sharply, as softening inflationary pressures raised bets of interest rate cuts.
 

The benchmark 10-year yield was at 6.9746 per cent as of 10:00 a.m. IST, having closed at 6.9832 per cent in the previous session.
 

"As expected, bonds are seeing offers lined up, and hence benchmark yield is even unable to break the key level of 6.98 per cent convincingly. We do not expect any major move today," a trader with a primary dealership said.
 

 

New Delhi will raise 220 billion rupees ($2.63 billion) via the sale of bonds, which includes the 7-year and 40-year bonds.
 

US yields dropped, with the 10-year yield touching a four-month low on Thursday. However, it pared some of its fall in Asian hours on Friday.
 

The US consumer price index (CPI) dipped 0.1 per cent last month after being unchanged in May. For the 12 months through June, the CPI rose 3.0 per cent, following a 3.3 per cent gain in May.
 

A Reuters poll had estimated inflation to rise 0.1 per cent month-on-month, and 3.1 per cent for 12 months to June.
 

The latest data has led to a repricing of interest rate cut expectations, with the probability of a 25-basis-point rate cut by the Federal Reserve in September jumping to 93 per cent from around 75 per cent before the inflation data.
 

Chances of a 75 bps cut in 2024 have risen to 46 per cent, up from 27 per cent, according to the CME FedWatch Tool.
 

With Fed officials apparently getting a little more nervous about labour market weakness, it strengthens the case for a September rate cut, said Capital Economics.
 

Market also awaits local retail inflation data due later in the day. A Reuters poll predicted retail inflation to edge up to 4.80 per cent in June, snapping five months of declines, largely because of a jump in vegetable prices and against 4.75 per cent in May.

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