The 10-year benchmark 7.26% 2032 bond yield is expected to remain in the 7.40%-7.45% band, after closing at 7.4262% on Monday, a trader with a private bank said.
Indian markets were shut on Tuesday for a local holiday.
"We may see yet another day of low trading activity with shallow volumes, as there are no cues for traders to track," the trader said.
"The 10-year U.S. yield is hovering around 4% and should act as a major trigger for the week."
Treasury yields inched higher on Tuesday, with the 10-year yield near the 4% mark, while the two-year yield, which is a closer indicator of interest rate expectations, jumped above the 5% handle for the first time in over 15 years. The yield curve inversion between the two-year and 10-year deepened to over 100 basis points (bps), a level last seen in 1981.
Yields rose after remarks from Federal Reserve Chair Jerome Powell indicated the U.S. central bank could become more aggressive in its rate hike path.
Powell told the Senate Banking Committee the Fed will likely need to raise interest rates more than expected in light of recent strong data and that it is prepared to take bigger steps if the "totality" of incoming information suggests tougher measures are needed to control inflation.
Fed funds futures are now pricing in more than a 62% chance
for a 50 bps hike at the central bank's March policy
announcement, while the market has fully factored in an
additional 100 bps hike in the coming months. The Fed has raised rates by 450 bps to 4.50%-4.75% over the
last year. Aggressive rate hikes from the Fed could force the
Reserve Bank of India (RBI) to follow suit.
KEY INDICATORS:
** Brent crude futures contract was up 0.1% at $83.40
per barrel, after easing 3.3% in the previous session
** 10-year U.S. Treasury yield was at 3.9912% and
the two-year note at 4.8544%
** RBI to auction Treasury Bills worth 390 billion rupees
($4.75 billion)
($1 = 82.0480 Indian rupees)
(Reporting by Dharamraj Dhutia
Editing by Sonia Cheema)
