Domestic bond yields were flat following a sharp drop as traders prepared for key consumer price index data. A Reuters poll estimates annual inflation rose to 5.93% in October, which could prompt the Reserve Bank of India to consider a larger 50-basis-point interest rate increase in December. Meanwhile, market sentiment faces additional pressure from benchmark 10-year U.S. Treasury yields nearing 5% alongside an upcoming 340-billion-rupee auction of Indian 10-year notes.
Key points
Anticipation of rising domestic inflation is keeping traders cautious ahead of the centra…: Anticipation of rising domestic inflation is keeping traders cautious ahead of the central bank's December rate decision.
Cheaper global crude oil prices have helped mitigate some of the inflationary pressure on…: Cheaper global crude oil prices have helped mitigate some of the inflationary pressure on the Reserve Bank of India.
Surging U.S. Treasury yields near five percent continue to limit the domestic bond market…: Surging U.S. Treasury yields near five percent continue to limit the domestic bond market's potential gains.
Sources checked by our analysis pipeline: 1
The benchmark 6.94% 2036 bond yield was little changed at 7.2183% at 10:30 a.m. IST, after posting its sharpest one-day fall in a month on Wednesday.
Markets await crucial consumer inflation data, which could reset expectations for the Reserve Bank of India's rate path. A Reuters poll forecasts October annual inflation at 5.93%, up from 5.54% in September.
On Thursday morning, Indian government bonds remained stable, reflecting a pause after recent volatility. Market sentiment is influenced by declining oil prices and climbing US Treasury yields, with inflation data on the horizon. The Reserve Bank of India is expected to modify its policy rate in light of these figures. Meanwhile, the ongoing Iran conflict could affect oil pricing, as traders prepare for a significant bond auction set for Friday.
The RBI raised rates in October for the first time in nearly four years and shifted to a "calibrated tightening" stance, and is widely expected to raise its policy rate by 25 basis points in December.
An upside surprise in inflation could spur bets on a 50-basis-point rate hike next month, traders…
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