India’s 10-year government bond yield is likely to trade in the range of 7.01%-7.05%, following the previous close of 7.0331%, a trader at a state-run bank said.
“Attention remains on the inflation number, but the U.S. data is more important for the market as it could impact Fed guidance and outlook for 2024,” the trader said.
India’s consumer inflation is likely to break a four-month downward trend in May due to a sharp rise in food prices, with consumer price inflation (CPI) expected to rise to 4.89 percent from 4.83 percent in April, according to a Reuters survey of 50 economists conducted June 5-10.
The data will be released after market hours on Wednesday. The U.S. Retail Price Index will be released afterwards. A Reuters poll expects data for the 12 months ending in May to be unchanged from April at 3.4%. Ahead of the data and the Fed decision, U.S. yields have remained elevated, especially as nonfarm payrolls data could point to strength in the economy and ease pressure from the central bank to cut rates. Futures are indicating a 50% probability of a rate cut at the September meeting, down from 60% a week ago. The market is also pricing in a 37 basis point rate cut in 2024, versus about 50 basis points last week, according to the CME FedWatch tool. Domestically, market sentiment may be further calmed after Prime Minister Narendra Modi’s Bharatiya Janata Party retained key posts in the new coalition government, including the finance ministry.
Rajeev Mohan, president, treasury and international markets at Kotak Mahindra Bank, said the new government’s weaker majority may lead to more welfare spending but will not lead to additional borrowing, keeping bond yields from rising.Key indexes:** Brent crude futures down 0.1% to $81.50 a barrel after rising 2.5% the previous day** 10-year Treasury yields at 4.4473%, 2-year at 4.8657%** Seven states to raise 77.5 billion rupees ($928.02 million) in bond issues ($1 at 83.5110) (Editing by Dharamraj Dutia and Irene Soren)
