Benchmark bond yield stuck around 7.30%, inflation trigger awaited

Government bond yields were largely unchanged in the early session on Monday, with the benchmark bond yield clinging to 7.30 per cent levels as traders awaited the latest inflation prints from India and the United States.

The 10-year benchmark bond yield was at 7.3025 per cent as of 10:00 a.m. IST after ending the previous session at 7.2992 per cent, a trader with a primary dealership said.

Traders also waited for debt supply as states will raise Rs 12,500 crore via the sale of bonds later in the day as Indian markets are closed on Tuesday for a local holiday.

"Most traders are not active today due to holidays and even globally, there is no major change. So we are in for a rangebound trading session with shallow volumes," a trader with a private bank said.

India's retail inflation data for October is due after market hours later in the day. A Reuters poll predicted the reading at a four-month low of 4.80 per cent.

US Treasury yields remained largely unchanged, with the 10-year yield around the 4.65 per cent mark as investors eyed key inflation readings.

A majority of market participants do not expect the Federal Reserve to raise rates further, with a modest 10 per cent probability of a hike in December. The Fed has increased rates by 525 basis points since March 2022.

Still, recent hawkish remarks from Fed Chair Jerome Powell suggesting the US central bank may not be done hiking interest rates just yet led to a rise in Treasury yields last week.

Meanwhile, oil prices stayed lower on worries over waning demand. The benchmark Brent crude contract was around $80 per barrel, near its lowest level in over three months.

Easing oil prices is good for large importers like India at a time when the Reserve Bank of India is focusing on lowering inflation to its 4 per cent target.