Meanwhile, Indian states raised 325.70 billion rupees
($3.95 billion) through the sale of bonds during the day, which
was over 60 billion rupees more than the planned outlay. The
cutoff yields were slightly higher than estimates.
U.S. yields stayed volatile through the session, with the
10-year yield dropping to 3.46% earlier in the day, and then
jumping to 3.63%. Traders are awaiting U.S. inflation data due
later in the day.
The Fed funds futures are now pricing in an over 75% chance
for a 25-bps hike in March, and 25% for status quo. The odds for
a 50-bps hike had risen to 68% last week. ($1 = 82.5030 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
By Dharamraj Dhutia
MUMBAI, March 14 (Reuters) - Indian government bond yields
ended higher on Tuesday as local retail inflation stayed above
the central bank's target, cementing bets of another hike in
policy rates next month.
Higher state debt sale added to supply, while rise in the
10-year U.S. yield also weighed.
The 10-year benchmark 7.26% 2032 bond yield ended at 7.3841%, after closing lower at 7.3579% on Monday.
"Local bonds are completely tracking the movement in U.S.
yields," said Raju Sharma, head of fixed income at IDBI Mutual
Fund.
If U.S. inflation stays elevated, the Federal Reserve may
opt for a rate hike next week, and a similar action should be
seen by the Reserve Bank of India (RBI), Sharma added.
India's retail inflation was at 6.44% in February and
remained above the central bank's target for the second month.
Core inflation also stayed above 6%, according to economists.
The RBI has raised the repo rate by 250 basis points in this
financial year to 6.50%. The next policy decision is due on
April 6.
"We continue to expect a repo rate hike of 25 bps in the
April policy, with further actions being data dependent," Kotak
Mahindra Bank said.
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