India bond yields marginally lower as traders await US inflation data

India's retail inflation eased in July due to vegetable inflation falling and high base effect as annual retail inflation was 3.54 per cent in July, lowest since Aug 2019, down from 5 per cent in June

Indian government bond yields were marginally lower on Wednesday, tracking US peers after benign producer price data, with the focus shifting to US inflation data due later in the day.
 

The benchmark 10-year yield was at 6.8697 per cent as of 10:05 a.m. IST, compared to its previous close of 6.8786 per cent.

Indian financial markets will be closed on Thursday for Independence Day.
 

US bond yields eased on Tuesday after the July Producer Price Index rose a less-than-expected 0.1 per cent, after rising 0.2 per cent in June, as cheaper services tempered the rise in the cost of goods.
 

Slowing inflation and a cooling labour market have led financial markets to anticipate that the Federal Reserve will start its easing cycle in September.
 

Futures markets reflect odds of about 54 per cent that the Fed will cut 50 basis points (bps) against 46 per cent for a 25 bps cut. Traders are pricing in a full percentage point of easing by the year-end.
 

India's retail inflation eased in July due to vegetable inflation falling and a high base effect. The annual retail inflation was 3.54 per cent in July, the lowest since August 2019, and down from 5.08 per cent in June.
 

"Given that the 4 per cent inflation target is still missed on a durable basis, we do not think that this sub-4 per cent print would have any impact on the reaction function of the Reserve Bank of India," said Indranil Pan, chief economist at Yes Bank.
 

The central bank will remain focused on the domestic growth-inflation mix and a long patient hold on the repo rate is the most likely outcome from RBI, Pan added.
 

Last week, the Indian central bank kept the key interest rate unchanged, retaining its focus on bringing inflation down, even as global market volatility left other major central banks poised to ease policy.

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