MUMBAI: Indian government bond yields trailed US peers higher on Monday, with the benchmark yield hitting a nearly four-month high and sovereigns announcing another tough borrowing schedule.
The 10-year bond yield of 7.26% in 2032 was at 7.4443% as of 10:10 am IST, after closing higher at 7.4181% on Friday. It reached 7.4488%, the highest since November 7, earlier in the day.
The yield has risen by an aggregate of 15 basis points (bps) over the past three weeks. “We are already at 7.45% and a test of 7.50% remains on the cards as there are no bullish factors that could see a strong reversal right now,” said a trader with a primary agency.
U.S. Treasury prices fell on Friday after data showed consumer spending, which accounts for more than two-thirds of economic activity, jumped 1.8% last month, against expectations for a 1.3% rise.
The Consumer Price Index, the Federal Reserve’s preferred gauge of inflation, also rose 0.6% last month, the highest since June 2022 and following a 0.2% increase in December.
The 10-year yield was around 3.95%, while the two-year, the closest gauge of interest rate expectations, was 4.80%.
The Fed is now expected to raise rates by 75 bps by June, following a 450 bps hike since March 2022.
Meanwhile, supply pressures will continue to weigh on local traders as states are expected to borrow more, while the Center will increase the supply of shorter Treasury bills in March.
Indian sovereigns aim to raise 308.33 billion rupees ($3.72 billion) through bond sales on Tuesday – the highest level for the current financial year.
New Delhi will also borrow 390 billion rupees through treasury bills for the remaining five weeks of this fiscal, compared with 290 billion rupees previously.
Indian bonds have slightly lower yields, trailing US peers, given the debt selloff
The government raised 14.21 billion rupees through bonds in the current fiscal, and aims to raise 15.43 trillion rupees next year, amid a demand-supply mismatch, traders added.