Government bond yields marginally lower, tracking US peers

Government bond yields: Government bond yields ended marginally lower on Wednesday, tracking the drop in US Treasury yields after soft retail sales data.

India's benchmark 10-year yield ended at 6.9746 per cent, following its previous close at 6.9789 per cent.

"Bonds will continue to track the movement in US yields and oil prices in the next few days," said Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank.

"Foreign buying is expected to pick up next week and the benchmark is expected to inch closer towards 6.90 per cent."

US yields eased on Tuesday after data showed retail sales in the world's largest economy were weaker than expected in May, reinforcing expectations that the Federal Reserve is likely to start lowering interest rates this year.

Philadelphia Fed President Patrick Harker expects only one rate cut in 2024 as he sees slowing but above-trend economic growth, a modest rise in the unemployment rate, and a "long glide" back to target for inflation as his base case.

The futures market is pricing in two rate cuts of 25 basis points (bps) each in 2024, even though the Fed has slashed its forecast to only one 25 bps cut this year, according to the CME FedWatch tool

Back home, traders are awaiting the minutes of the Reserve Bank of India's (RBI) latest policy meeting, in which the central bank maintained the status quo on rates and its stance. The minutes are due on Friday.

Government should avoid "adventurism" and continue to focus on bringing down inflation towards the target of 4 per cent despite a growing clamour to signal a pivot in monetary policy, RBI Governor Shaktikanta Das said on Tuesday.

Meanwhile, foreign investors have bought more than $10 billion of Indian government bonds that will be included in a widely followed JPMorgan debt index on June 28, taking their ownership of such papers to a record high.