By Dharamraj Dhutia
MUMBAI, March 3 (Reuters) - Indian government bond yields
are expected to rise marginally early on Friday, as their U.S.
counterparts continue to remain elevated, while states come up
with yet another heavy borrowing plan for next week.
The 10-year benchmark 7.26% 2032 bond yield is expected to remain in the 7.42%-7.47% band, after closing
higher at 7.4386% on Thursday, a trader with a private bank
said.
With the 10-year U.S. yield consistently remaining above the
4% mark, local bonds should continue to see bearish pressure,
the trader said.
The 10-year U.S. yield touched 4.09%, its highest in four
months on Thursday, reinforcing concerns that the Federal
Reserve will need to raise interest rates further.
The two-year yield, which is a closer indicator of interest
rate expectations, jumped to 4.94%.
Data from Europe had already pushed U.S. government bond
yields higher as stickier-than-expected euro zone inflation
numbers supported bets that rates would go higher and stay there
for longer.
The Fed has raised 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 to 100 bps in the coming months.
Meanwhile, Indian states aim to raise 298.58 billion rupees
($3.62 billion) on Monday, the quantum coming above the
scheduled amount for the first time in seven months.
Higher supply comes at a time when worries over higher
inflation continue to dent sentiment, after retail inflation
jumped to 6.52% in January.
Heatwave is the more immediate concern to tracking the risk
of El Nino in April-June, Citi analysts said.
"The overall macro impact of these would be the result of a
tussle between the severity of weather shocks and the
government's ability to intervene in the agriculture market
through different supply-side responses. We expect Feb-23
headline inflation at 6.6%."
The RBI has raised the repo rate by 250 bps since May 2022
to 6.50%, and is widely expected to hike again in April.
KEY INDICATORS:
** Brent crude futures contract was little changed
at $84.45 per barrel, after rising 0.5% in previous session
** 10-year U.S. Treasury yield was at 4.0576%
and the two-year note was at 4.8934%
($1 = 82.3930 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
