Indian bond yields may start week tad higher tracking US peers

Indian bond yields may start week tad higher tracking US peers

Indian government bond yields could rise marginally in the early session on Tuesday, tracking an uptick in U.S. peers, while traders await debt supply and Federal Reserve monetary policy decision.

The 10-year benchmark 7.26% 2033 bond yield is expected to be in the 7.10% to 7.15% range after closing at 7.1196% in the previous session, a trader with a private bank said. Bond yields plunged in April, with the benchmark yield dropping 20 basis points on bets of policy pivots.

The move comes ahead of the Fed policy decision due on May 3, wherein a 25 basis-point rate hike is widely factored in, and the focus would be on Chair Jerome Powell’s comments. The odds of a 25 basis-point rate hike by the Fed have risen close to 95%.

A hawkish Fed could also influence the Reserve Bank of India, which maintained a pause on rates in a surprising move last month. Focus would also remain on demand for the debt auction in the holiday-shortened week. New Delhi aims to raise 330 billion rupees through the sale of bonds on Thursday, and the auction includes 140 billion rupees of the benchmark 2033 paper.

Indian fixed income markets were shut on Monday and will be closed on Friday for a local holiday.