The 10-year benchmark 7.26% 2033 bond yield was at 6.9895% as of 10:50 a.m. IST, after closing at 6.9938% on Friday.
"Market participants factored in softer inflation even before the actual print and that pushed yields below 7% on Friday. Hence, the reaction at today's open is somewhat muted," a trader with a foreign bank said.
India's annual retail inflation eased to an 18-month low in April at 4.7%. This was the lowest reading since October 2021, when it hit 4.48%, and also lower than Reuters' forecast of 4.80%. A fall in April retail inflation gave reassurance that India's monetary policy is on the right track, central bank governor Shaktikanta Das said on Friday. The Reserve Bank of India had surprised the market with a pause on rates in April when a 25-bps hike was largely expected. The repo rate currently is at 6.50%. While the inflation is easing, there are no indicators pointing towards rate cuts by the RBI and therefore, the benchmark will struggle to sustain below 7%, a trader at a private bank said. The U.S. Treasury yields rose on Friday after data showed that consumers' long-term inflation expectations increased to their highest reading since 2011 in May, while consumer sentiment slumped to a six-month low. The 10-year U.S. Treasury note rose 7 bps on Friday and was last at 3.4663%
"If the (Indian) benchmark yield closes below 7% today, then
odds of it further falling to 6.90% during the week increases
but it will have a strong support at that level," a dealer at a
state-run bank said.
(Reporting by Bhakti Tambe; editing by Eileen Soreng)
