INDIA BONDS-India bond yields edge higher tracking US peers; RBI policy eyed

Credit: REUTERS/Vivek Prakash

By Bhakti Tambe

MUMBAI, Feb 5 (Reuters) - Indian government bond yields ended higher on Monday, reversing some declines from last week, tracking a surge in U.S. Treasury yields after strong economic data dampened aggressive Federal Reserve's rate-cut bets.

India's benchmark 10-year yield IN071833G=CC ended at 7.0937%, compared with the previous close of 7.0555%.

U.S. yields jumped, with the 10-year yield staying around the 4.10% handle, as by 353,000 jobs last month, nearly double the 180,000 that economists polled by Reuters had estimated.

Revised data for December showed 333,000 jobs were added instead of 216,000 as previously reported, which led investors to further trim bets over the timing and pace of Fed rate cuts in 2024.

The odds for a rate cut in March have now dropped to around 15% from 66% last month, while the odds for a 150-bps point rate cut in 2024 have also plummeted to just 25% from a near certainty earlier.

Domestic bond yields dropped last week after India said it will aim to reduce the fiscal deficit to 5.1% of gross domestic product, in the next financial year and will aim to gross borrow 14.13 trillion rupees ($170.21 billion) via bonds, sharply below expectations.

"The fiscal compression will provide much comfort to RBI (Reserve Bank of India) on the attainment of its inflation target," said Suyash Choudhary, head of fixed income at Bandhan AMC.

The central bank's monetary policy outcome is due on Thursday, when it is expected to hold its key interest rate steady at 6.50%, according to a Reuters poll.

Meanwhile, the government's plan to tighten fiscal policy could also push the country's central bank to ease its stance on liquidity, Neeraj Gambhir, the treasury head of Axis Bank said.

(Reporting by Bhakti Tambe; Editing by Sohini Goswami)

((Bhakti.Tambe@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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