Indian benchmark bond yields marginally higher mirroring US peers

Indian government bond yields ended marginally higher on Wednesday, with the benchmark yield moving above the 7% mark, tracking a similar move in U.S. Treasury yields.

The benchmark 10-year yield ended at 7.0129%, following its previous close of 6.9956%.
 

"Bond yields moved higher tracking Treasuries, but we should see some consolidation around 7%, ahead of multiple events that are lined up in the coming days," Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank said.
 

U.S. yields rose, with the 10-year yield rising above 4.55%, as uncertainty over the timing and magnitude of rate cuts by the Federal Reserve in 2024 persisted.
 

The futures market is pricing in only around 34 basis points (bps) of rate cuts this year, compared with over 50 bps earlier in the month, according to the CME FedWatch Tool.
 

Still, bets of a strong fiscal position of the government continued to favour investor sentiment, especially after the Reserve Bank of India's record surplus transfer earlier this month.
 

Some market participants are anticipating a further cut in borrowings, even as New Delhi has already lowered the supply of Treasury bills till the end of June.
 

The government aims to buy back bonds maturing within this financial year worth 400 billion rupees ($4.80 billion) on Thursday, after having bought back securities worth Rs 17,900 crore so far in May.
 

Traders also eyed fresh debt sale along with India's growth rate data for the financial year 2024, both of which are due on Friday.

These developments would be followed up by general election results on June 4. The RBI's monetary policy decision is due on June 7, with analysts expecting a status quo.
 

Meanwhile, bonds did not react much to S&P Global Ratings raising India's sovereign rating outlook to 'positive' from 'stable', while retaining the rating at 'BBB-'.