Indian government bond yields are expected to fall at the start of trading on Monday, following the decline in US bonds after weaker than expected employment figures.
Bond yields are also likely to fall after the government announced a securities buyback worth 400 billion rupees on Friday.
The benchmark 10-year yield is expected to move in a range of 7.10%-7.15%, after its previous close of 7.1470%, a trader at a private bank said.
“The US 10-year yield has fallen to 4.50%, having recently reached a high of 4.70%. This will therefore lower local yields. In addition, the buyback announcement will cause yields to fall at shorter term, but will favor general market sentiment,” added the trader.
U.S. Treasury yields fell to their lowest levels in several weeks on Friday following news that the world’s largest economy created fewer jobs than expected in April, reinforcing expectations that the Federal Reserve will begin tapering its interest rates later in the year.
Data showed that the number of nonfarm jobs in the United States increased by 175,000 in April. Economists polled by Reuters had forecast an increase of 243,000 jobs.
Following these reports, US rate futures have priced one to two cuts of 25 basis points each for 2024, likely starting in September or November, depending on the probability application of LSEG rate.
Over the past few weeks, the futures market had forecast a single cut due to continued high inflation.
Meanwhile, oil prices rose slightly on Monday after Saudi Arabia raised June crude prices for most regions and as the prospect of a Gaza ceasefire deal appears dim .
Rising commodity prices are a major negative for India as they impact local retail price inflation.
“Profit-taking by state-owned banks and a further rise in oil prices could limit the decline in benchmark yields below 7.10%,” said a trader at a private bank. KEY INDICATORS: ** Brent oil futures rose 0.3% to $83.23 a barrel, after falling 0.8% in the previous session ** The US Treasury yield at ten years is 4.4975%, the two-year yield is 4.8056% (reported by Bhakti Tambe; edited by Sohini Goswami).
