scorecardresearchBond yields dip as inflation below 6%, focus on US CPI, Fed meet

Bond yields dip as inflation below 6%, focus on US CPI, Fed meet

Updated: 13 Dec 2022, 10:37 AM IST
TL;DR.

  • The benchmark 10-year yield was at 7.2782% on Tuesday. The yield ended at 7.2938% on Monday, after having risen by 10 basis points in the previous six sessions.

With the domestic headline numbers out, traders were now focusing on U.S. retail inflation data due later in the day and the Federal Reserve policy decision due on Wednesday.

With the domestic headline numbers out, traders were now focusing on U.S. retail inflation data due later in the day and the Federal Reserve policy decision due on Wednesday.

(Reuters) - Indian government bond yields were lower in the early session on Tuesday after domestic inflation eased within the central bank's target range for the first time this year, but elevated core inflation weighed on sentiment.

With the domestic headline numbers out, traders were now focusing on U.S. retail inflation data due later in the day and the Federal Reserve policy decision due on Wednesday.

The benchmark 10-year yield was at 7.2782% on Tuesday. The yield ended at 7.2938% on Monday, after having risen by 10 basis points in the previous six sessions.

"Inflation is a positive, but traders will wait to see U.S. data and Fed's action and guidance which will be a major driver," a trader with a state-run bank said.

India's annual retail inflation rose 5.88% in November from 6.77% in the previous month, surprising analysts who had predicted the reading at 6.40%.

Core inflation, however, remained sticky, which economists said would force the central bank towards another rate hike in February.

"Even though there are tell-tale signs that inflation is easing, the press remarks from (Reserve Bank of India) governor were hawkish, clearly signalling that the battle against inflation is not over, and setting the stage for a 25 bps rate hike in February," Barclays said in a note.

The RBI has raised the repo rate by 225 basis points since May to 6.25% to curb inflation that stayed above the upper tolerance range for 10 straight months to October.

Meanwhile, annual industrial output contracted 4% in October, its weakest performance in 26 months, against economists' expectations of a 0.3% expansion.

The U.S. retail inflation data will provide more clarity in likely Fed action, while it is expected to hike its interest rate by 50 basis points, after raising the same by 375 bps since March.

Eight Indian states will raise 94.86 billion Indian rupees ($1.15 billion) through a sale of bonds maturing in five years to 20 years.

 

Article
Government securities are tradable debt instruments that the government offers in the form of bonds, treasury bills, or notes.
First Published: 13 Dec 2022, 10:37 AM IST