The 10-year benchmark 7.26% 2032 bond yield is expected to trade in the 7.40%-7.46% band, after closing lower at 7.4180% on Wednesday, a trader with a private bank said. "The sudden spike in U.S. yields will have a spillover impact on local bonds, but the 7.45% level is expected to see a strong support," the trader said.
The 10-year U.S. yield rose above the 4% mark for the first time in four months, while the two-year yield climbed to 4.92%, its highest levels since 2007, on higher interest rate fears. The two-year yield is a closer indicator of interest rate expectations.
A string of overseas data as well as U.S. manufacturing data continued to fuel concerns that rates could keep climbing for longer than anticipated.
Yields have been on a rise in the past month as strong
economic data supported expectations that the U.S. Federal
Reserve will tighten financial conditions more aggressively to
fight inflation.
The Fed has raised interest rates by 450 basis points to
4.50%-4.75% over the last one year and is expected to hike them
further by 75 bps in coming months.
Bond yields eased on Wednesday, after data showed that
India's economy grew by 4.4% in October-December, down from 6.3%
in July-September, and below a Reuters forecast of 4.6%.
The upcoming consumer price index data and Fed commentary
will, however, have a larger bearing on the decision of the
Reserve Bank of India, analysts at ICICI Securities Primary
Dealership said.
"GDP data release hasn't materially changed our view."
The RBI has raised the repo rate by 250 basis points since
May 2022 to 6.50%, and is widely expected to hike one more time
next month.
KEY INDICATORS:
** Brent crude futures contract was little changed
at $84.35 per barrel, after rising 0.5% in previous session
** 10-year U.S. Treasury yield was at 4.0121%
and the two-year note was at 4.9098%
(Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
