The yield on the 10-year benchmark note was at 6.4737%, as of 10:40 a.m IST. It closed at 6.4790% on Wednesday.
Bond yields move inversely to prices.
Indian government bonds experienced a slight increase in early trading, fueled by optimism surrounding upcoming inflation data releases in both the U.S. and India. These figures are anticipated to influence expectations for monetary policy easing in both countries. Traders are closely watching U.S.
U.S retail inflation for August is due after Indian market hours, with a Reuters poll predicting the reading at 2.9% year-on-year against 2.7% in the previous month.
“If U.S. inflation comes below expectations, it could strengthen the chances of a 75-basis-point rate cut by the Federal Reserve in 2025, which will boost expectations of at least one more rate cut in India,” a trader at a private bank said.
The market has fully priced in a 25-basis-point cut by the Fed next week, while there is nearly 70% conviction for a 75-bp cut by December, according to CME Group’s FedWatch Tool.
Traders in the Indian debt market are also eyeing some signal from the Reserve Bank of India on its rate trajectory, given that inflation is benign and U.S. President Donald Trump’s tariffs threaten India’s growth.
India’s August inflation print, due on Friday, is expected to be at 2.1%, compared with 1.55% in July amid a fading “base effect” and rising food prices, according to a Reuters poll.
New Delhi is also set to raise 280 billion rupees ($3.17 billion) through a sale of bonds on Friday.
RATES
India’s overnight index swaps dipped as sentiment remained upbeat ahead of the U.S. inflation print, which could increase bets of a Fed rate cut.
The one-year OIS rate was down about 1 bp at 5.46%, while the two-year OIS rate was flat at 5.44%.
The liquid five-year OIS rate fell 1.5 bps to 5.68%.
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