By Dharamraj Dhutia
MUMBAI, Feb 27 (Reuters) - Indian government bond yields
ended higher on Monday, with the benchmark bond yield closing at
levels last seen nearly four months ago, tracking the increase
in their U.S. peers.
Bond yields also rose as the market braces for heavy state
debt supply on Tuesday.
The 10-year benchmark 7.26% 2032 bond yield ended at 7.4533%, its highest since Nov. 4, after closing at
7.4181% on Friday. The yield has risen by an aggregate of 15
basis points (bps) in the last three weeks.
"Bond yields have inched higher factoring in one more rate
hike by the RBI (Reserve Bank of India). The yield curve has
become flatter and we expect this to continue till the fiscal
year-end," said Puneet Pal, head of fixed income at PGIM India
Mutual Fund.
Pal said he expects the 10-year benchmark bond yield to
trade between 7.30% and 7.50% till the end of the financial
year.
U.S. Treasury prices fell as data showed that consumer
spending, which accounts for more than two-thirds of economic
activity, jumped 1.8% last month, while the personal consumption
expenditures price (PCE) index, shot up 0.6% - the highest since
June 2022 and after gaining 0.2% in December.
The PCE index is the Federal Reserve's preferred inflation
gauge and a rise could drive the Fed to hike interest rates for
longer. The central bank is now expected to raise rates by 75
bps till June.
The 10-year yield was around the 3.95% mark, while the
two-year yield, the closest indicator of interest rate
expectations, was around 4.80%.
Meanwhile, supply pressure will continue as Indian states
aim to raise 308.33 billion rupees ($3.72 billion), the most
this financial year, on Tuesday.
Moreover, New Delhi will also borrow 390 billion rupees
through T-Bills in the remaining five weeks of this fiscal,
compared with 290 billion rupees per week previously.
($1 = 82.8275 Indian rupees)
(Reporting by Dharamraj Dhutia
Editing by Sonia Cheema)
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