Bond yields end higher as inflation, oil prices in focus


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MUMBAI — Indian government bond yields ended marginally higher on Monday, as market awaited key retail inflation data, which would give cues for further policy rate hikes.

The benchmark 10-year bond yield ended at 7.1811%, compared with 7.1699% in the previous session. The 10-year 7.26%, 2032 bond yield was at 7.1354%, after closing at 7.1143% on Friday.

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Data due later in the day is expected to show that retail inflation likely rose to an annual 6.9% in August, faster than the 6.71% pace in the previous month, according to a Reuters poll. It would mark the eighth straight month that the rate has been above RBI’s upper tolerance limit.

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Later on Wednesday, data is expected to show that wholesale consumer prices in Asia’s third largest economy rose by 13%.

“The big picture is that both rates of inflation are likely to have remained uncomfortably high by historic standards,” Capital Economics said in a note.

“That will probably ensure that the RBI continues to frontload policy tightening with another 50 basis points hike to the repo rate in its meeting at the end of this month.”

Capital Economics’ call for a 50 basis points is towards the hawkish end of consensus expectations.

Meanwhile, the U.S. consumer inflation data is due on Tuesday, a potential big event for global bond markets. Several U.S. Federal Reserve policymakers have repeatedly said that bringing down inflation is their top priority.

The 10-year Treasury yield was hovering 3.30% ahead of the data, while shorter maturity yields were near their highest levels since 2007.

Oil pries were up on Monday, extending their rebound from over seven-month lows. Brent crude futures rose to $93.80 after having fallen to below $87.50 last Thursday. (Reporting by Nimesh Vora and Dharamraj Lalit Dhutia; Editing by Neha Arora)


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