Government bond yields to dip in early trade following US peers

Govt bond yield: The government bond yields are expected to dip in the early session on Monday, following a decline in US counterparts triggered by softer-than-expected jobs data.

The bond yields are expected to decrease further after the government's announcement of a 400 billion rupee securities buyback on Friday.

According to a trader from a private bank, the benchmark 10-year yield is likely to fluctuate in the range of 7.10 per cent to 7.15 per cent, following its previous close of 7.1470 per cent.

"The 10-year US yield dropped to 4.50 per cent from its recent high of 4.70 per cent, which will influence local yields. Additionally, the buyback announcement is anticipated to decrease shorter-tenor yields and improve overall market sentiment," the trader explained.

US Treasury yields experienced a decline to multi-week lows on Friday following reports that the country's economy added fewer jobs than anticipated in April. This reinforced expectations of potential interest rate cuts by the Federal Reserve later this year.

Data revealed that US non-farm payrolls increased by 175,000 jobs in April, falling short of economists' expectations of 243,000.

In response, US rate futures projected between one to two cuts of 25 basis points each for 2024, with the likelihood of commencement in September or November, as indicated by the LSEG's rate probability app.

Previously, the futures market had factored in just one cut due to persistent inflation concerns.

In parallel, oil prices saw a slight increase on Monday following Saudi Arabia's decision to raise June crude prices for most regions and amid slim prospects of a ceasefire deal in Gaza.

However, higher commodity prices remain a concern for India as they impact local retail inflation.

"A potential rise in oil prices and profit booking from state-run banks may limit the decline in benchmark yields below 7.10 per cent," noted a trader from a private bank.

(With Reuters inputs)