Benchmark govt bond yields edge higher to 7.12% on profit booking

Indian government bond yields ended higher on Tuesday after a recent rise in the prices of securities prompted traders to book profits.

The benchmark 10-year yield ended at 7.1284%, following its previous close of 7.1068%, the lowest since April 10.

Bond yields declined over the last few days, tracking a similar move in U.S. yields and as the government announced a surprise buyback of bonds worth 400 billion rupees ($4.79 billion), due on Thursday, which will infuse liquidity.
 

U.S. Treasury yields remained largely unchanged on Monday, with the 10-year anchored around the 4.50% mark, as investors digested Friday's data showing non-farm payrolls rose by 175,000 jobs in April below estimates of 243,000.
 

The data validated the Federal Reserve's suggestion that the economy was not overheated and that it could embark on its rate-easing cycle in 2024. Futures are now pricing 44 basis points of rate cuts in 2024, according to the LSEG's rate probability app.

The Reserve Bank of India (RBI) kept the lending rate steady for the seventh consecutive meeting in April as growth was seen staying robust while inflation has remained above its 4% target.

Market participants will watch out for local inflation print for April, due next week.
 

"We forecast CPI inflation will have remained stable at 4.8% Y/Y in April, due to a low base, though prices are expected to increase sequentially. Stronger upward momentum in food prices was likely offset by declines in fuel prices and easing in core inflation," Shreya Sodhani, regional economist, Barclays said in a note.
 

"The RBI sees the 4% inflation target within sight, but we think it would still want to assess the progress of this year's monsoon before considering any monetary easing." The market expects the RBI to cut rate cuts only in 2025.