The benchmark 10-year yield was at 7.3175% as of 10:00 a.m. after closing at 7.2776%. The yield dropped 11 basis points (bps) last week, its biggest move since the week ended Nov. 11. Bond traders fear that the impact of a hawkish Fed could spill over to the local central bank's decision as well as commentary, a trader with a state-run bank said. "Also, bonds were slightly overbought, after the budget and we are seeing some correction as well as unwinding."
U.S. Treasury prices fell as data showed job growth surged and services activity rebounded in January, likely undermining the Federal Reserve's attempts to slow the economy to bring inflation down. The 10-year U.S. yield climbed 13 bps, while the two-year yield jumped 21 bps on Friday, as the market factors in another 50 bps rate hike by the Fed.
Non-farm payrolls surged by 517,000 jobs last month, sharply higher than a Reuters estimate of 185,000, while the non-manufacturing PMI increased to 55.2 last month, above an estimated 50.4 reading, after dropping to 49.2 in December. Sustained supply from states as well as the resumption of bond sales from the Reserve Bank of India is also weighing on sentiment. Indian states aim to raise 202.50 billion rupees ($2.46 billion) via sale of bonds on Tuesday, after raising over 250 billion rupees over the last two weeks, while the central bank sold bonds worth 16.60 billion rupees in the week ended Jan. 27. Traders now await the RBI's monetary policy decision due on Wednesday, when the central bank is expected to raise its main interest rate by 25 bps to 6.50%, before leaving it at that level for the rest of the year, a Reuters poll of economists showed. ($1 = 82.4520 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
