MUMBAI, July 14 (Reuters) – Indian government bond yields ended higher on Monday, as traders reacted to elevated U.S. Treasury yields, while looking through a sharp decline in local retail inflation that was largely factored in.
The yield on the benchmark 10-year bond ended at 6.3163%, compared with a previous close of 6.2994%.
Still, so-called ultra long bond yields declined for a second straight session as investors continued to chase 30-year to 50-year papers. The 30- to 50-year bond yields eased by around 3 bps, after a large state-run player bought a chunk of 50-year bonds on Friday.
India’s annual retail inflation slowed to 2.10% in June, the lowest since January 2019. The pace of price rise was slower than 2.82% in the previous month, government data showed on Monday, as well as against an estimate of 2.50% in a Reuters poll of 50 economists.
“Bonds will largely remain rangebound, with a bias for yields to move up,” said Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.
The 10-year U.S. yield rose 8 basis points on Friday and stayed elevated on Monday as traders worried about potentially higher inflation rates in the world’s largest economy.
The U.S. retail inflation print, due after Indian market hours on Tuesday, is expected to show a 0.3% month-on-month gain, up from 0.1% in May, according to a Reuters poll.
“The US treasuries witnessed some sell off on continuing fiscal concerns and Fed minutes that indicated no rate cuts in the near term,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.
India’s short-term overnight index swap rates moved lower amid receiving interest after the local inflation data release, while long-end rates saw paying due to the rise in U.S. yields.
The one-year OIS rate ended at 5.54% and the two-year OIS rate was up 2 basis points at 5.51%. The liquid five-year rose nearly 4 basis points to 5.74%. (Reporting by Dharamraj Dhutia; Editing by Ronojoy Mazumdar)
