Indian govt benchmark bond yields ends higher, tracking their US peers

Indian government bond yields ended higher on Monday, tracking their U.S. peers, while the local central bank's commitment to meet its inflation target on a sustained basis further fuelled worries that monetary conditions would stay tight for a while.

The 10-year benchmark bond yield closed at 7.3769%, after ending at 7.3626% in the previous session.
 

"We continue to believe the Reserve Bank of India's (RBI) monetary policy committee will stay on prolonged pause and focus on keeping monetary conditions tight. Any monetary easing is likely in back half of next calendar year," said A Prasanna, head of research at ICICI Securities Primary Dealership.
 

The primary dealership believes that a fairly flat yield curve in context of tightening global financial conditions, especially via the U.S. yield curve, has made open market sales an appealing prospect.
 

The RBI's rate-setting panel will remain focused on aligning inflation to its target of 4%, and only after it achieves that on a sustained basis will its attention shift to the objective of growth, the minutes of its latest meeting showed.
 

The decision to reinforce the 4% retail inflation target follows inflation returning to its 2%-6% comfort zone, but does not necessarily signal rates will remain higher for longer, two external members of the committee told Reuters.
 

Traders also continue to keep an eye on the start of RBI's debt sale plan.
 

The 10-year U.S. yield crossed the 5% mark to hit its highest level in over 16 years in Asian hours, as investors remain worried about higher-for-longer U.S. rates, especially after Federal Reserve Chair Jerome Powell's comments last week.
 

The benchmark Brent crude contract stayed above the critical $90-per-barrel mark amid supply concerns due to the ongoing conflict in the Middle East.