Govt bond yields seen steady ahead of state debt sale, US economic data

Indian government bond yields are expected to be little changed in opening trade on Tuesday, as traders await a weekly state debt sale and fresh cues in the form of U.S economic data.
 

The benchmark 10-year yield is likely to move between 6.85 per cent and 6.89 per cent, compared with its previous close of 6.8754 per cent, a trader with a foreign bank said.
 

"The market is closely watching key US data and Federal Reserve's rate action as these will be directional cues. Till then, the local bond yields will remain rangebound," the trader added.
 

US Treasury yields advanced on Friday and remained higher in Asian trading on Monday, after economic data raised expectations the Federal Reserve was likely to opt for a smaller rate cut at its September meeting.
 

US markets were closed on Monday for Labor Day.
 

Market participants are awaiting the US non-farm payrolls data later this week, after Fed Chair Powell last month said a slowdown in the labour market was "unmistakable", hinting at a shift in the Fed's focus towards the job market over fighting inflation.
 

Markets are fully pricing in a rate cut of at least 25 basis points at the Fed's mid-September meeting. Expectations for a 50 basis point cut, however, fell to 31 per cent from 34 per cent last week.
 

Meanwhile, Nomura expects the Reserve Bank of India to begin cutting interest rates next month as inflation edges lower and economic growth weakens.
 

India's economic growth slowed to 6.7 per cent year-on-year in the April-June quarter as a decline in government spending during national elections weighed.
 

"If growth continues to hug 7 per cent, the RBI could be patient in delaying the rate easing to April 2025, till headline inflation durably aligns with 4 per cent target," Citi Research said in a note.

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