February 14, 2025
Financial Assets

Indian Bond Yields Expected To Dip As Traders Eye 6.85% Break


What’s going on here?

Indian government bond yields are set to dip today, with the 10-year benchmark yield eyeing the 6.85% mark, influenced by remarks from the US Federal Reserve and falling US Treasury yields.

What does this mean?

The benchmark 10-year yield in India is expected to move between 6.84% and 6.87%, just below its previous close of 6.8578%. Despite favorable conditions, breaking the 6.85% barrier might still prove challenging, as cautioned by a primary dealership trader. The drop in US Treasury yields, with the 10-year ending at a year-low due to revised job data and the Fed’s July meeting minutes, has bolstered this sentiment. The Fed’s updated employment figures suggest an 818,000 job shortfall, reflecting their growing concerns over the labor market. With some Fed members even mulling a rate cut as early as July, traders are now keenly awaiting Fed Chair Jerome Powell’s comments at the Jackson Hole summit on Friday.

Why should I care?

For markets: Economic crossroads for global yields.

Bond markets globally are reacting to US economic indicators, with Indian traders closely watching US Treasury yields and the Fed’s policy direction. Lower US yields often lead to a global ripple effect, influencing other markets, including India’s, potentially making bonds an attractive investment in the short term. This delicate balancing act between economic data and policy guidance is something investors need to track diligently.

The bigger picture: Global monetary policy in flux.

Internationally, expectations are rising for central banks to pivot on monetary policy amidst economic slowdowns. The CME FedWatch tool now shows a 35% probability of a 50 basis points cut by the Fed in September, with even larger cuts anticipated in 2024. Meanwhile, minutes from the Reserve Bank of India’s latest meeting reflected a steady policy stance, maintaining current rates. These moves highlight a broader narrative of central banks adapting to evolving economic landscapes, which could significantly impact global investment strategies.



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