Govt bond yields largely unchanged as traders await stronger triggers

Indian government bond yields were largely unchanged in early session on Tuesday as traders awaited stronger triggers, even as US Treasury yields ticked higher.
 

India's benchmark 10-year yield was at 6.9902 per cent as of 10:00 am IST, following its previous close of 6.9832 per cent. Indian debt markets were shut on Monday for a public holiday.
 

With the 10-year yield below 7 per cent, "there is very little room for the benchmark bond yield to move further down, and hence we could see some sideways moves and consolidation around these levels," a trader with a primary dealership said.
 

US yields rose on Monday ahead of a slew of economic data and commentary from Federal Reserve speakers, who could further clarify the timing of the first interest rate cut this year.
 

The US 10-year yield dropped sharply last week on expectations of two rate cuts of 25 basis points each in 2024, even as the Fed slashed its forecast to only one cut of 25 bps this year, down from three projected in March.
 

The futures market is pricing in 45 bps rate cut this year, according to the CME FedWatch tool.
 

Traders will also assess local fundamentals after Reuters reported on Monday, citing two government sources, that New Delhi is considering lowering personal tax rates for certain categories of individuals.
 

"We would need to see the actual fiscal impact of any such plans, and how the government actually funds it," another trader said.

The broader focus remains on foreign inflows into government bonds, with just a few days to go when Indian government bonds get included in JPMorgan's emerging market debt index. The inclusion is expected to drive inflows of $20 - $25 billion.
 

Foreign investors added new seven-year bond positions during its auction on Friday, while overseas banks have also been on a bond-buying spree for the last four weeks.