Bond yields rose in the week ended Feb. 24 amid continuous supply and tightening of liquidity deficit in the banking system. Market participants expect bond yields to be in the 7.35%-7.47% band this week.
"Overall market sentiment is bearish, and with persistent upward movement in U.S. yields, Indian bonds will remain under selling pressure as we move into March," said Raju Sharma, head fixed income at IDBI Mutual Fund. Bond traders will also track the country's economic growth data due on Tuesday, reading from which may be considered by the central bank in its next monetary policy decision due in April.
Domestic growth likely slowed further in the October-December quarter amid weakening demand, and is set to lose more momentum as a series of interest rate hikes weigh on activity, according to a Reuters poll of economists. Gross domestic product (GDP) growth in the third quarter of this fiscal year slipped to an annual 4.6%, according to the median forecast of 42 economists, having moderated to 6.3% in July-September. Market participants are gearing up for yet another rate hike by the Reserve Bank of India (RBI) in April, after a jump in January inflation data. In the currency markets, the rupee finished last week little-changed at 82.75 per dollar. Its losses were milder compared to most of its Asian counterparts, thanks to the 82.90-83 zone being protected by the RBI. The rupee held its ground through multiple revisions of Federal Reserve peak rate this month; that, coupled with its improving macroeconomic fundamentals have stoked some optimism about the currency continuing to outperform its peers. Still, the rupee was expected to keep trading between its recent range of 82.40-83 amid lack of major triggers, dealers said. In the beginning of the week, it would take cues from the U.S. core PCE price index data that came out late on Friday. Concerns about tepid sentiment hurting risk assets will persist as "broader geopolitical tensions and interest rate hike fears keep the markets down and the dollar stronger," said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
KEY EVENTS:
* India Q3 GDP - Feb 28, Tuesday (5:30 p.m. IST)
* China Feb NBS and Caixin Mfg PMI - March 1, Wednesday
(07:00
a.m. IST)
* India Feb HIS S&P Global Mfg PMI - March 1, Wednesday
(10:30
a.m. IST)
* U.S. Feb ISM Mfg PMI - March 1, Wednesday (8:30 p.m. IST)
* India Feb S&P Global Services PMI - March 3, Friday (10:30
a.m.
IST)
(Reporting by Anushka Trivedi and Dharamraj Dhutia; Editing by
Nivedita Bhattacharjee)
