Indian govt bond yields to edge lower, tracking decline in US peers

Indian government bond yields are expected to edge lower in early session on Monday, tracking a decline in US peers after softer-than-expected jobs data.

The bond yields are also likely to fall after the government announced a buyback of securities worth 400 billion rupees on Friday.

The benchmark 10-year yield is likely to move in a 7.10 per cent -7.15 per cent range, following its previous close of 7.1470 per cent , a trader with a private bank said.

"The 10-year US yield fell to 4.50 per cent from its recent peak of 4.70 per cent . So that will bring local yields down. In addition, the buyback announcement will lead to a decline in shorter-tenor yields but will help the overall market sentiment," the trader added.

The US Treasury yields tumbled to multi-week lows on Friday on news that the world's largest economy created fewer jobs than expected in April, reinforcing expectations that the Federal Reserve will start cutting interest rates later this year.

Data showed US non-farm payrolls rose by 175,000 jobs in April. Economists polled by Reuters had forecast payrolls advancing by 243,000.

Following the reports, US rate futures priced in between one to two cuts of 25 basis points each for 2024, most likely starting in September or November, according to the LSEG's rate probability app.

For the last few weeks, the futures market had factored in just one cut due to persistently elevated inflation.

Meanwhile, oil prices edged up on Monday after Saudi Arabia hiked June crude prices for most regions and as the prospect of a Gaza ceasefire deal appeared slim.

Higher commodity prices are a major negative for India as they impact local retail inflation.

"Profit booking from state-run banks and a further rise in oil prices may cap a fall in the benchmark yields below 7.10 per cent ," a private bank trader said.

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