India bonds flat ahead of India, US inflation prints

Time of India

a day ago

Indian government bonds
held steady in early trade on Monday as traders shrugged off a sharp drop in
U.S. Treasury prices
and awaited inflation data from both India and the U.S. due later this week.
The yield on the benchmark 10-year bond was at 6.3042% as of 10:05 a.m. IST, compared with previous close of 6.2994%.
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"Bonds will largely remain rangebound during the day, unless the inflation data surprises the market," a trader at a private bank said.
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India bonds flat ahead of India, US inflation prints
Indian government bonds remained stable in early trading. This happened despite a drop in U.S. Treasury prices. Traders are waiting for inflation data from India and the U.S. The Reserve Bank of India is removing cash from the banking system. Banks have parked 1.52 trillion rupees with the RBI. Overnight index swap rates were little changed in early trading.
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Investors, who have been piling wagers for another rate cut, will have their conviction tested with the latest
inflation readings
, traders said.
"Headline inflation is likely to continue undershooting the core print, with the latter expected to stay around 4%," DBS said in a note.
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"Slowing inflation provides the room for the policy committee to consider further easing, though a cut in August is not on the cards," the note said.
The data will be released at 4:00 p.m. IST.
Benign food prices and a high base likely helped
Indian inflation
slow to a more than six-year low at 2.50% in June, from 2.82% in May, according to a Reuters poll of 50 economists.
Meanwhile, the U.S. CPI print, due on Tuesday, is expected to show a 0.3% month-on-month gain, up from 0.1% in May, according to a Reuters poll.
India's
interbank call money rate
has been rising since the
Reserve Bank of India
started removing cash from the banking system.
The mean of the weighted average interbank call money rate rose to 5.33% in last 11 days, up from 5.28% for similar preceding period. The central bank started conducting variable rate reverse repo since June 27, and currently banks have parked 1.52 trillion rupees ($17.68 billion) with the RBI, which will mature on Friday.
RATES
India's shorter overnight index swap rates (OIS) were little changed in early trading, while higher U.S. yields put paying pressure on the long end.
The one-year OIS rate was at 5.54% and the two-year OIS rate at 5.50%. The liquid five-year rose 1 basis point to 5.71%.