Indian govt bond yields steady, RBI warns of cautious policy on inflation

Indian government bond yields are expected to trade little changed early on Tuesday, with caution setting in after the central bank's warning on the likely need for a more cautious monetary policy approach to manage high food price inflation.
 

The benchmark 10-year yield is likely to move between 6.85 per cent and 6.88 per cent, compared to its previous close of 6.8653 per cent, a trader with a primary dealership said.
 

"We are unlikely to see any major move today and the focus would be on the minutes of the central bank's (meeting) to be released this week," the trader added.
 

 

The minutes of the Reserve Bank of India's last meeting, at which it held rates and its policy stance, are due on Thursday.

While most central banks are poised toease policy, the RBI is focussed on taming food price-led inflation, as its latest comments show.
 

If high food prices persist and threaten to spill over into more generalised inflation, a more cautious approach to monetary policy could be needed, it said on Monday.
 

While retail inflation fell to a near five-year low of 3.54 per cent in July, it was largely due to a base effect as food prices eased from previous highs.
 

Meanwhile, US Treasury yields eased marginally on Monday, with the market eyeing Federal Reserve Chair Jerome Powell's commentary at the Jackson Hole symposium at the end of the week.
 

Before that, the minutes of the Fed's July meeting will be released on Wednesday. Traders have fully priced in a 25 basis point cut in September, according to the CME FedWatch tool.

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