The RBI has kept its interest rate steady at 6.5% during the past six policy meetings and indicated it would consider rate cuts only when retail inflation eases closer to the 4% target on a sustainable basis.
Indian government bond yields ended steady on Wednesday ahead of the conclusion of the U.S. central bank meeting where the Federal Reserve is expected to keep borrowing costs unchanged. The benchmark 10-year yield ended at 7.0918%, following its previous close of 7.0981%. The Fed is scheduled to announce its monetary policy decision after Indian market hours, against the backdrop of recent data showing robust inflation in the world’s largest economy.
“We now see a high probability of ‘no Fed cuts’ in 2024 as they struggle to get to the last mile of disinflation,” Madhavi Arora, lead economist at brokerage Emkay Global, said. The odds of an interest rate cut in June have eased below 60% from around 70% a week earlier, according to the CME FedWatch tool. “That will also mean a shallower rate cut cycle. This will soon spill over to emerging market central banks, including the Reserve Bank of India (RBI),” Arora added.
The RBI has kept its interest rate steady at 6.5% during the past six policy meetings and indicated it would consider rate cuts only when retail inflation eases closer to the 4% target on a sustainable basis. U.S. Treasury yields have stayed elevated, reflecting concerns over a delayed start to the rate-cutting cycle. The 10-year yield hovered around the 4.30% level.
Meanwhile, the persistent rise in oil prices is detrimental to Indian bonds as elevated commodity prices could translate into higher domestic retail inflation.The benchmark Brent crude contract exceeded the $87 per barrel mark, rising nearly 7% in the past five sessions through Tuesday.The RBI will also conduct state debt sale worth 240 billion rupees on Thursday.
Source:financialexpress.com