scorecardresearchBond yields ease, tracking U.S. peers; inflation data key

Bond yields ease, tracking U.S. peers; inflation data key

Updated: 09 Jan 2023, 08:30 PM IST
TL;DR.
  • The benchmark 10-year yield ended at 7.3427% in the first trading session of the week, after ending at 7.3736% on Friday, its highest level since Nov. 9.
The benchmark 10-year yield ended at 7.3427% in the first trading session of the week.

The benchmark 10-year yield ended at 7.3427% in the first trading session of the week.

(Reuters) - Indian government bond yields eased on Monday, tailing a drop in U.S. peers on mixed economic data, with the focus shifting to inflation readings later this week.

The benchmark 10-year yield ended at 7.3427% in the first trading session of the week, after ending at 7.3736% on Friday, its highest level since Nov. 9.

U.S. yields tumbled on Friday after data showed domestic wages rose less than expected last month and new jobs increased more than expected, while service-sector activity shrank for the first time in more than 30 months.

The 10-year U.S. yield fell 15 basis points to 3.56%, while the two-year yield slumped 19 bps to 4.26%.

Weaker economic data has raised bets that the Federal Reserve may slow down its pace of hikes from the frenzied pace of last year when it boosted interest rates by 425 bps.

"The U.S. bond markets lowered their expectations of the terminal Fed rate post the PMI data to a shade lower than 5%," said Puneet Pal, head of fixed income at PGIM India Mutual Fund.

The next key data point is U.S. and India inflation data for December, which comes out on Thursday.

India's inflation eased to 5.88% in November, coming in below the central bank's upper tolerance level of 6% for the first time in 11 months.

Traders also await the federal budget announcement on Feb. 1. The government will target reducing its budget deficit without losing focus on long-term economic growth, DBS Bank's chief economist, Taimur Baig, told Reuters on Monday.

"We expect the budget to chart a path towards some fiscal consolidation."

DBS Bank expects the government to target a fiscal deficit of 5.8-5.9% of gross domestic product (GDP) in 2023/24 compared with the 6.4% outlined for the current financial year ending on March 31.

 

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First Published: 09 Jan 2023, 08:30 PM IST