Indian bond yields inch higher as US peers jump on robust economic data

Indian government bond yields rose at the start of the week, tracking a spike in US Treasury yields after strong economic data dampened bets of rate cuts by the Federal Reserve.
 

India's benchmark 10-year yield was at 7.0310 per cent as of 10:00 a.m. IST on Monday, following its previous close of 7.0168 per cent. The yield had risen last week, after easing for six weeks.
 

"We have another eventful week coming up, with factors both locally as well as globally that could provide strong direction, but for now, we may see the yield in a 7.01 per cent-7.05 per cent band," a trader with a primary dealership said.
 

US bond yields rose after the economy created far more jobs than expected in May and annual wage growth re-accelerated, pushing the 10-year yield higher by 15 basis points on Friday.
 

The US nonfarm payrolls increased by 272,000 jobs, against economists' expectations of payrolls advancing by 185,000, while average hourly earnings rose 0.4 per cent after having slowed to a 0.2 per cent rate in April.
 

The odds of a rate cut in September have declined to 47 per cent from 68 per cent a week ago, while the expected aggregate rate cuts in 2024 are down to 36 basis points from nearly 50 bps last week, according to the CME FedWatch tool.
 

The Reserve Bank of India on Friday kept the key interest rate unchanged for the eighth consecutive meeting, and maintained its inflation projection while raising the growth forecast.
 

Nomura remains long on Indian government bonds, but with lower conviction levels, and expects the benchmark bond yield to ease to 6.90 per cent by end of July.
 

India and US are due to publish their May retail inflation data this week, followed by the Fed's monetary policy decision.

A status quo is expected and focus will be on policymakers' projections.

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