Indian bond yields may dip at start of the week, focus on Fed decision
Indian government bond yields are expected to ease marginally in opening trade at the start of the week as oil prices and U.S. yields come off from their recent highs, while the major focus will remain on the Federal Reserve's monetary policy decision.
The benchmark 10-year Indian yield (IN071833G=CC) is likely to trade in a 7.16%-7.21% range, following its previous close at 7.1870%, a trader with a primary dealership said.
"After strong demand at Friday's auction, there was some follow-up buying in the secondary market and that momentum should hold given mild easing in Treasury yields and oil, but 7.15%-7.16% levels for the benchmark should hold," the trader said.
U.S. yields eased on Friday after data showed a key inflation gauge was largely in line with expectations.
The personal consumption expenditures (PCE) price index increased 0.3% last month and rose 2.7% annually. Economists polled by Reuters had forecast the index climbing 0.3% on-month and 2.6% year-on-year.
Still, the data did little to change U.S. rate cut expectations, with the Federal Reserve largely expected to adopt a cautious tone at its monetary policy decision on Wednesday, traders said.
Investors are now pricing in the possibility of around 34 basis points (bps) of cuts by the Fed in 2024, compared to over 150 bps at the start of 2024, according to CME's FedWatch Tool.
Meanwhile the benchmark Brent crude contract eased in Asian hours on Monday as Israel-Hamas peace talks in Cairo eased fears of a wider conflict in the Middle East, which could have raised uncertainties over supply.
Indian bond yields declined last week after rising for the first three weeks of the new fiscal year starting April as strong demand at the weekly debt auction further cemented belief that the current levels would be the peak for yields, traders said.
KEY INDICATORS:
** Brent crude futures 
BRN1! 1% lower at $88.60 per barrel, after rising 0.6% in the previous session
** Ten-year U.S. Treasury yield 
US10Y at 4.6630%, two-year yield >US2YT=RR> at 4.9934%