HawThe announcement of a 25% tariff by US President Donald Trump on India is likely to hurt the Indian government bonds, with yields expected to cross key levels. Indian rupee is also expected to face the brunt, with a hawkish US Fed commentary likely to add to woes.
The yield on the benchmark 10-year bond is likely to move between 6.36% and 6.40%, a trader at a private bank said, after closing at 6.3700% on Wednesday, according to a Reuters report.
“There could be an upward move in yields, with the technical resistance broken, as not only is the rupee a negative trigger, but the decreasing odds of a rate cut from the Federal Reserve are further hurting,” the trader told Reuters.
Trump slapped 25% levy on Indian goods, likely straining the relationship between the world’s largest economy and the most populous democracy. However, Trump also added that negotiations between the two countries are still ongoing.
The rupee was set to open on a weak note compared to the US dollar after declining to a four-month low in the previous trade. The fall will push the domestic unit closer to the record low of 87.95 hit earlier this year.
US Fed adopts hawkish tone
Meanwhile, the Fed maintained status quo on interest rates, which was along the expected lines, but hawkish commentary from Chair Jerome Powell reduced the chances of a rate cut in September.
Powell said it is too soon to say whether the central bank will cut its interest rate target in September, and cited low unemployment and solid labour market conditions.
(With inputs from Reuters)
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