Indian government bond yields are expected to trend lower at the start of the week, as the government is set to buy back securities this week once again, with an increase in quantum against the previous one.


The benchmark 10-year yield is likely to move in a 7.10 per cent-7.15 per cent range on Monday, following its previous close of 7.1276 per cent, a trader with a state-run bank said.


“There are no strong directional cues so the yield will trade in a narrow range during the day. Market awaits US and local inflation data next week,” the trader added.


The central government will buy back up to 60,000 crore rupees ($7.18 billion) on Thursday. This would be the second such operation in two weeks, and this step is for more efficient cash management, Economic Affairs Secretary Ajay Seth said.


The central bank accepted bids worth around 105 billion rupees on Thursday against a notified amount of 40,000 crore rupees, as bondholders asked for higher prices.


Meanwhile, the major focus will remain on inflation prints from India and the United States, both due during the week, for cues on interest rate trajectory.


India will report consumer price inflation data on Monday.


Inflation is likely to have eased to 4.80 per cent in April, just shy of March’s rate, according to a Reuters poll.

The US inflation print is due on Wednesday, with the reading for 12 months to April expected at 3.6 per cent, down from 3.8 per cent in March, as per a Reuters poll.


The 10-year US yield continued to remain around the critical 4.50 per cent mark, as inflation data would lead to more clarity on the timing and magnitude of interest rate cuts in 2024.


Traders are pricing in the probability of two 25-basis-point cuts this year, with the first expected in September, according to CME FedWatch tool.

First Published: May 13 2024 | 8:54 AM IST

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