Indian bond yields surge to over two-months high; likely to remain elevated, say analysts
nonfarm payrolls witnessed the smallest monthly gain in over two years as it increased by 209,000 jobs in June, below the expectations of 225,000. The unemployment rate also slipped to 3.6% from 3.7% in May, indicating a tight labour market. The report comes after the minutes of the US Federal Reserve’s June meeting reiterated that more rate hikes are coming. “The US 10 year bond yield surged to 4.09% on hopes of aggressive Fed rate hikes especially after the US ADP private sector jobs data surged to the biggest monthly increase since July 2022.
However, the Fed’s preferred jobs data, non-farm payrolls marked the smallest rise in the number of jobs since December. Now the focus has shifted to US and India’s CPI data which will be released on Wednesday to gauge the rate trajectory of both the countries," said an economist with a private bank. Until then, she expects, the trading range in India’s 10-year bond yield could be 7-7.20% Bond yields tend to move in the opposite direction to the bond prices.
With improved economic outlook and inflation sticking above the tolerance range of the central banks, hopes of higher interest rates in the future are rising globally. As interest rates rise, investors dump old bonds of lesser rates and prefer new bonds that come at a higher interest rate. “The Indian benchmark bond yields are rising, mirroring the trends in the US.
The recent macroeconomic data has shown that the US is nowhere near a recession and also the Fed is ready to hike rates. All this is giving a boost to bond yields," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. On the domestic front, hopes are diminishing that the Reserve Bank of India (RBI) will opt for a rate cut as soon as
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