India’s 10Y yield could see some downward bias going forward


On domestic front, Bloomberg Index proposed to include Indian bonds (FAR) to be part of the EM local currency Index from Sep'24, which would support more flows


Dipanwita Mazumdar

Economist,

Bank of Baroda

Mumbai, January 9, 2024: Global markets reacted to a multitude of factors. Fed Governor (Michelle Bowman) spoke of rate cuts if inflation continues to fall towards Fed’s 2% target, to prevent policy from being way too restrictive. Elsewhere, in China, further monetary stimulus may be forthcoming to provide impetus to growth. On macro front, New York Fed 1-year inflation expectations moderated, showing that expectation remaining closely anchored. In Germany, factory orders moderated on a sequential basis, while exports and imports picked pace. In Japan, CPI in Tokyo slowed for the second straight month, in line with BoJ’s view of subsiding import-driven price pressures. On domestic front, Bloomberg Index proposed to include Indian bonds (FAR) to be part of the EM local currency Index from Sep’24, which would support more flows. Thus, India’s 10Y yield could see some downward bias going forward.

  • Global indices ended mixed. US indices closed in green led by tech stocks and ahead of the inflation print that might offer guidance on the trajectory of Fed path. As per Fed watch tool, investor expect 63.8% (from 88.5%-last week) chance of a cut in Mar'24. On the other hand, Sensex ended in red and was dragged down by losses in banking and metal stocks. It is trading higher today, in line with other Asian stocks.

Global currencies closed mixed. DXY fell by 0.2% as investors await more data to gauge the trajectory of Fed rates. EUR closed flat despite a pickup in Eurozone’s consumer confidence index. INR ended a tad stronger, tracking lower oil prices. It is trading further stronger today, in line with its Asian peers.

  • Barring Japan (flat), other global yields closed lower. US 10Y yield dropped by 2bps as investors awaited inflation data and comments by Fed officials. On the back of the strong data print last week (payrolls report), the prospects of aggressive rate cuts seems muted, as per investors. India’s 10Y yield also fell by 3bps amidst moderation in oil prices. It is trading tad lower today.

(The views expressed in this research note are personal views of the author(s) and do not necessarily reflect the views of Bank of Baroda. Nothing contained in this publication shall constitute or be deemed to constitute an offer to sell/ purchase or as an invitation or solicitation to do so for any securities of any entity.)

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