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Updated December 26th, 2023 at 17:52 IST

Bond yields stable as MPC minutes unveil no surprises in last week of 2023

As we head into the new year, market sentiments are currently pricing in an 88% probability of a rate cut from the Federal Reserve in March.

Reported by: Business Desk
Bond yields hold steady as traders await fresh triggers
Bond yields | Image:Republic World
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The curtain closes on 2023 with government bond yields holding steady as the minutes from the Reserve Bank of India's recent meeting failed to spark significant market movements.

Closing at 7.1819 per cent on Tuesday, the 10-year benchmark bond yield exhibited a marginal flattening from the previous session's 7.1862 per cent. Last week witnessed an uptick in yields as traders opted for profit-taking following a substantial drop in the prior week. Monday saw Indian markets closed for Christmas festivities.

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Anticipating a shift in monetary policy at the dawn of the new financial year, Aditya Vyas, an economist with STCI Primary Dealer, suggested, "The RBI (Reserve Bank of India) will cut interest rates, assuming inflation follows the expected trajectory. We expect the 10-year to trade within the range of 7.10 per cent -7.35 per cent in the near term."

The Monetary Policy Committee (MPC) of India remains attuned to inflation risks, grappling with an ambiguous outlook amid volatile and uncertain food prices, according to the minutes from the December policy meeting released last Friday. Despite a rise in retail inflation to 5.55 per cent in November, marking its fastest pace in three months, the MPC maintained the status quo on the repo rate at 6.50 per cent, holding its stance for the fifth consecutive time.

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In a deviation from expectations, Indian states surpassed their planned bond calendar, raising Rs 20,759 crore and marking the first time in 13 quarters that they exceeded the targeted amount.

Meanwhile, on the global front, US yields remained subdued, with the 10-year yield hovering around the 3.90 per cent mark during Asian trading hours. This comes in the wake of data indicating that inflation, as measured by the personal consumption expenditures price index for the 12 months through November, rose 2.6 per cent, following a 2.9 per cent increase in October.

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As we head into the new year, market sentiments are currently pricing in an 88 per cent probability of a rate cut from the Federal Reserve in March.

(With Reuters inputs.)

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Published December 26th, 2023 at 17:52 IST

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