Bond yields dipped on Wednesday as the anticipation of Housing Development Finance Corp executing an interest-rate hedge once it completes its mega bond sale this week, drove longer-duration bond yields lower, traders said. India's largest mortgage lender aims to raise at least 50 billion rupees ($604.65 million) through the sale of 10-year bonds later in the day, with an option to retain an additional 200 billion rupees. Market sentiment had turned cautious after a spike in India and U.S. retail inflation rates, cementing bets of more rate hikes.
The 10-year U.S. yield hit 3.80% earlier in the day, for the first time in over six weeks, after data showed retail sales surged in January, further complicating the Federal Reserve's efforts of managing rates.
The Fed has raised interest rates by 450 basis points (bps) since 2022 and is widely expected to further raise them by 50 bps over the next three months. India's retail inflation in January jumped to 6.52%, above the RBI's upper threshold for the first time since October.
Last week, the RBI raised the repo rate for the sixth
consecutive time by 25 bps to 6.50% and kept the door open for
more tightening after saying that core inflation stayed
"sticky".
"Pending more domestic and global data and policy
developments, we choose to retain baseline view of a pause and
shift in stance towards neutral in April," ICICI Securities
Primary Dealership said. Minutes of the latest RBI meeting are
also key, it said.
KEY INDICATORS:
** Brent crude futures up 0.4% at $85.70 per barrel,
after easing 0.4% in previous session
** 10-year U.S. Treasury yield at 3.7953% and
two-year note at 4.6160%
($1 = 82.6920 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
