INDIA BONDS-India bond yields seen lower tracking U.S. peers

By Dharamraj Dhutia MUMBAI, March 6 (Reuters) - Indian government bond yields are expected to trend lower in the early session on Monday, tracking a sharp reversal in U.S. yields. The 10-year benchmark 7.26% 2032 bond yield is expected to remain in the 7.38%-7.43% band, after closing lower at 7.4161% on Friday, a trader with a private bank said. "The sudden drop in U.S. yields will be positive for local bonds today as we have been tracking global factors very closely," the trader said. Treasury yields slipped on Friday after hitting new highs last week as they met resistance following comments from Federal Reserve officials that temporarily calmed fears around the direction of inflation and interest rates. The 10-year U.S. yield touched 4.09%, its highest in four months on Thursday, but eased after short covering, traders said. Yields had been rising on bets that the Fed may continue to hike rates for a longer duration.

The Fed has raised rates by 450 basis points (bps) to 4.50%-4.75% over the last year and is expected to hike them further in the coming months. Still, the downmove may be capped ahead of yet another heavy state debt supply calendar later in the day as Indian markets are to remain shut on Tuesday for a local holiday.

Indian states aim to raise 289.58 billion rupees ($3.55 billion) and the quantum is 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. Barclays expects the reading at 6.3% for February.

The Indian benchmark bond yield is expected to move in the 7.35%-7.45% range in March, with a major focus on inflation trajectory, said Pawan Somani, head of fixed income at Knight Fintech Research. The Reserve Bank of India has raised the repo rate by 250 bps since May 2022 to 6.50% and is widely expected to hike rates again in April. KEY INDICATORS: ** Brent crude futures contract was down 0.66% at $85.29 per barrel, after rising 3.2% last week ** 10-year U.S. Treasury yield was at 3.9537% and the two-year note at 4.8544% ** Indian states to raise 289.58 billion rupees via sale of bonds ($1 = 81.6800 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman)

Reuters

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INDIA BONDS-India bond yields seen lower tracking U.S. peers

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