Bond yields stable, traders await treasury developments

Bond yields stable: Government bond yields maintained a steady trend in early Thursday trading, with market participants awaiting new catalysts following a positive start to US yields in the New Year.

The 10-year benchmark bond yield stood at 7.2149 per cent at 10:00 am, a marginal change from its previous close at 7.2156 per cent. Over the first three sessions of 2024, the benchmark yield has increased by four basis points.

Both local and global fixed income traders have experienced an unexpected upward push in yields at the beginning of the year. Analysts are now observing developments in US data and local demand-supply dynamics to gain a clearer picture. 

US yields showed intraday gains on Wednesday, briefly surpassing 4 per cent for the 10-year yield before closing lower. Investors are scrutinising data and minutes from the Federal Reserve's December meeting to assess the possibility of a soft landing for the US economy.

Federal Reserve officials engaged in a comprehensive debate about an impending shift in US monetary policy during the December meeting, raising concerns about the sustainability of the economy under existing high interest rates. 

While there is an anticipation of a rate cut by the Fed in March, the probability has decreased from around 90 per cent last week to 73 per cent, according to the CME Fedwatch tool.

Investors are eagerly awaiting the release of December non-farm payroll data after Indian market hours on Friday for additional insights.

Domestically, traders are expressing concerns about substantial supply in the final quarter of the financial year. States aim to raise Rs 4.13 lakh crore ($49.58 billion), and the central government plans to sell bonds worth Rs 2.37 lakh crore, bringing the total supply to 6.5 trillion rupees.

In addition, market participants are closely monitoring the pace of foreign investments in government bonds, particularly after 2023 witnessed a surge in such inflows to the highest level in six years.

(With Reuters Inputs)