Govt bond yields expected to inch higher after inflation 'non-event'

Indian government bond yields are expected to inch higher early on Tuesday as domestic retail inflation came largely in-line with estimates after investors made purchases on Monday in anticipation of a lower print.
 

The benchmark 10-year yield is likely to move between 7.10 per cent-7.15 per cent, following its previous close of 7.1157 per cent, a trader with a state-run bank said.
 

"Inflation data has turned out to be a non-event and traders who had build positions in anticipation of a lower reading may unwind slightly today," the trader added.
 

India's annual retail inflation rate eased slightly in April and stood at 4.83 per cent down from 4.85 per cent in March, partly due to lower fuel prices, although food prices remained elevated.
 

A Reuters poll had forecast April inflation at 4.80 per cent. Core inflation, which strips out volatile food and energy prices, is estimated at 3.23 per cent in April, compared with 3.3 per cent-3.4 per cent in March, according to two economists. The Indian government does not release core inflation figures.
 

Barclays forecasts retail inflation for May at 5.0 per cent.
 

"The momentum in domestic growth is still relatively robust, so the central bank likely sees little reason for monetary easing, as of now. We expect the MPC to begin with rate cuts in the fourth quarter of 2024, with the balance of risks towards a December cut, rather than October," Barclays economist Shreya Sodhani said.
 

Focus would now shift to the US inflation, due on Wednesday, with the reading for 12 months to April expected at 3.6 per cent, down from 3.8 per cent in March, as per a Reuters poll.
 

The 10-year US yield continued to remain around the critical 4.50 per cent mark.
 

Traders will also eye the response at government's second bond buy back in two weeks, as the government aims to buy bonds worth up to 600 billion rupees ($7.19 billion) on Thursday.