By Bhakti Tambe
MUMBAI, March 2 (Reuters) - Indian government bond
yields ended marginally higher on Thursday mirroring U.S. peer,
although trading volume remained thin.
The 10-year benchmark 7.26% 2032 bond yield ended at 7.4386%, after closing lower at 7.4180% on Wednesday.
"Local bond yields inched up following U.S. yields but the
upward move was capped as this month there is no fresh supply of
government bonds," Yogesh Kalinge, vice president at AK Capital
Services, said.
The 10-year U.S. yield rose above the 4% mark
for the first time in four months on Wednesday and it was last
at 4.03%. Separately, the two-year yield climbed to
4.92%, its highest level since 2007.
U.S. yields rose as a series of nasty inflation surprises
around the world spooked investors and stoked worry about
interest rate hikes. The U.S. central bank has raised interest
rates by 450 basis points to 4.50%-4.75% over the last year. If the U.S. yields continue to rise, then Indian government
bonds yields will also follow suit, Kalinge said, adding that
the domestic benchmark yield may break the crucial 7.50% level
in March.
In addition, interest rate hikes in the U.S. may also put
pressure on the Reserve Bank of India to do the same. 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 in April.
India's retail inflation in January jumped to 6.52% and will
pressure the central bank to tighten rates further, traders
said.
In the absence of fresh cues, market participants will await
fresh data points before taking any large positions, a dealer at
a state-owned bank said.
Over the next week, the benchmark bond yield is expected to
trade in the range of 7.42%-7.48%, according to market
participants.
(Reporting by Bhakti Tambe; editing by Eileen Soreng)
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