Indian Government Bond Yields Expected Stable Amid Awaited US Data and Debt Supply

Bond Yields: In Indian government bond market, early tring on Friday is expected to be relatively stable, with yields likely to remain largely unchanged as trers await new debt supply and key U.S. data. benchmark 10-year yield is anticipated to fluctuate within a range of 7.14 per cent to 7.19 per cent, following its previous close of 7.1598 per cent.

New Delhi plans to raise 280 billion rupees ($3.36 billion) through a bond sale later in day, including 100 billion rupees of a 15-year paper. However, breaking key resistance levels around 7.14 per cent to 7.15 per cent would require a significant trigger, which is not anticipated in current market environment.

U.S. Treasury yields experienced a decline on Thursday, with investors considering Federal Reserve's stance, which indicated that rate cuts were still plausible despite inflation persisting above 2 per cent target. U.S. 10-year yield fell below 4.60 per cent, with April non-farm payrolls data awaited for furr insights into interest rate outlook.

recent Fed decision to maintain interest rates and opt a less hawkish tone than anticipated has bolstered investor confidence. Expectations now lean towards possibility of approximately 40 basis points of rate cuts in 2024, up from around 35 basis points earlier in week, as indicated by CME's FedWatch Tool.

Market sentiment remains supported by Brent crude prices staying below $85 per barrel. Since India is one of largest importers of oil, fluctuations in oil prices directly influence country's retail inflation.

Key indicators to watch include Brent crude futures, with prices slightly higher at $83.85 per barrel, and U.S. Treasury yields, with ten-year yield at 4.5893 per cent and two-year yield at 4.8810 per cent. ditionally, market will closely monitor India's sovereign bond auction, as well as Reserve Bank of India's actions regarding underwriting fees and repo operations.