India government bond yields edge lower tracking US peers
The benchmark 10-year Indian bond yield ended at 7.0312%, lower than its previous close of 7.0548%. Indian financial markets will be closed on Friday for a local holiday.
U.S. yields declined, with the 10-year yield, dropping to a one-month low of 4.07% on Wednesday, after Powell said that continued progress on inflation «is not assured», but the central bank still expects to reduce rates later this year.
The odds for a rate cut in May have now eased to 17% from 25% a day ago, while that for a rate action in June stand at 70%, up from 63% in the previous week, according to the CME FedWatch tool.
Back home, broader market sentiment remained positive after inclusion of Indian government notes in Bloomberg's Emerging Market Local Currency Index. The market expects inflows of less than $5 billion from January 2025 onwards.
«So far, 2024 has already seen a $5 billion debt flow at the time when equity net flows are negative. The announcement is therefore positive for garnering not just passive flows but also active debt inflows,» Anitha Rangan, an economist at Equirus Group, said.
JPMorgan was the first to announce India's inclusion in its widely-tracked emerging market debt index last year, setting the stage for billions of dollars of inflows into the world's fifth-largest economy starting June.
«With the template for inflows set for two years, index inclusion does bring a good balance to navigate external uncertainties and bolster confidence for medium to longer term growth,» economist Rangan said.
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