off-the-wire

INDIA BONDS-Indian bond yields seen dropping after U.S. peers crash

Kitco Media
By Reuters
Published:
Updated:
Reuters
By Dharamraj Dhutia MUMBAI, March 13 (Reuters) - Indian government bond yields are expected to fall in the early session on Monday, as U.S. yields plummeted after the February non-farm payroll data, and on risk aversion. The 10-year benchmark 7.26% 2032 bond yield is expected to stay in the 7.35%-7.41% band after closing at 7.4321% on Friday, a trader with a private bank said. "The threat of an aggressive rate hike from the Federal Reserve for March is now completely off the table and with the rapid drop in U.S. yields, we are in for a gap down opening in Indian bond yields," the trader said. U.S. Treasury yields crashed on Friday as non-farm payrolls increased by 311,000 last month, above the 205,000 estimate of economists polled by Reuters. January's report was revised only slightly lower to 504,000 jobs from the previously announced 517,000. The average hourly earnings rose by 0.2% in February, slightly below the expected 0.3%, giving hope that the Fed could be less aggressive in policy tightening.


U.S. yields also fell as safe haven demand rose after SVB Financial Group became the largest bank to fail since the 2008 financial crisis on Friday. California banking regulators closed the bank and appointed the Federal Deposit Insurance Corporation as receiver for later disposition of its assets.


The 10-year U.S. yield dropped 23 basis points on Friday, while the two-year yield, which is a closer indicator of interest rate expectations, plunged 31 bps.


The Fed funds futures are now pricing an 85% chance for a 25 bps hike in March, and 15% for rates being left unchanged. The odds for a 50 bps hike had risen to 68% last week after Fed Chair's inflation remarks. Traders will also await inflation data from India and the U.S. due Tuesday.


India's retail inflation likely eased to 6.35% in February, but stayed above the Reserve Bank of India's upper threshold for a second straight month, a Reuters poll economists showed. Inflation had jumped 6.52% in January. KEY INDICATORS: ** Brent crude futures contract was down 0.4% after rising 1.5% in previous session ** 10-year U.S. Treasury yield was at 3.7083% and the two-year note at 4.4479% (Reporting by Dharamraj Dhutia Editing by Eileen Soreng)

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