Government bond yields seen stable, inflation in focus

Bond yields to open steady: Government bond yields are anticipated to open relatively steady on Friday, as US inflation data fails to impact expectations of early interest rate cuts. Attention shifts to local debt supply and domestic inflation indicators.

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The 10-year benchmark bond yield is predicted to hover in the 7.15 per cent-7.19 per cent range ahead of the debt auction, maintaining its previous close at 7.1619 per cent, according to a trader from a primary dealership. 

The government aims to raise Rs 33,000 crore ($3.97 billion) in the auction, including 160 billion rupees of the benchmark paper, which will bring the outstanding total to Rs 1.69 lakh crore, comfortably above the ad hoc limit.

Despite US inflation surpassing estimates, the market perceives it as non-threatening, and expectations for a March rate cut remain unchanged, noted the trader. The focus is now on demand for the benchmark paper at the auction.

US yields ended lower on Thursday, with the 10-year yield below the crucial 4 per cent mark. 

US consumer prices rose 0.3 per cent last month, with a 3.4 per cent increase in the 12-month period, slightly exceeding expectations. The odds of a Fed rate cut in March rose to 73 per cent.

Attention now turns to India's retail inflation print, expected to rise to 5.87 per cent from 5.55 per cent according to a Reuters poll, staying within the Reserve Bank of India's target range for the fourth consecutive month. 

Additionally, oil prices edged higher due to escalating tensions in the Middle East.

(With Reuters Inputs)