Government benchmark bond yields ended marginally lower after registering its biggest jump in six months in October. The yields jumped 10 basis points this month. The 10-year benchmark government bond yield also recorded the first monthly rise in four months, as the rally in U.S. Treasury yields outweighed the effect of the local central bank easing its policy stance.
The benchmark 10-year bond yield ended Friday at 6.83 per cent down from Thursday's 6.84 per cent. On Thursday, domestic bond yields rose by two basis points, following a significant spike in U.S. Treasury yields—particularly the 10-year yield, which has increased nearly 50 bps to 4.28 per cent. Strong economic data, especially the jobs data has diminished expectations for aggressive Federal Reserve rate cuts. Traders are now anticipating a 94 per cent probability of a 25-bps cut next week, with expectations shifting to only two cuts from December to March instead of four.
Meanwhile, in India, cities including Surat, Pimpri-Chinchwad, and Coimbatore, are planning to issue their first green bonds to fund climate initiatives, inspired by Rajkot Municipal Corp's recent proposal to raise up to USD 200 million. On the global macro front, the oil market showed some relief last week as Israel primarily targetted military installations of Iran leaving the oil fields unharmed.
Treasury And Bond Yields
The indicative yield for T-bills currently stands at 6.51 per cent, 6.64 per cent, and 6.59 per cent for three-month, six-month, and 364-day durations, respectively. In the 1-2 year tenure, 5.15% GS 2025 indicates a yield of 6.62 per cent.
Moving on to longer tenures, 7.04% GS 2029 (4-5 year tenure) and the 7.10% GS 2034 (9-10 year range) show indicative yields of 6.76 and 6.83 per cent respectively.
Bond Market Outlook
The Reserve Bank of India’s recent shift to a 'neutral' policy had initially lowered yields, prompting expectations that rate cuts could start as soon as December.
However, later Central Bank indicated that it would be very premature to draw a conclusion. Also, the inflation numbers ended up higher in September and also is expected to stay high in October. But good monsoon is expected to lower the food inflation and thus prompt a rate cut. The International Monetary Fund's latest minutes show that concerns about China's economy loom, particularly its property sector woes that were leading to "very weak" consumption and investment. This has led to declining consumer confidence, heightening the risk of deflation in China may further impact regional economies like South Korea and Vietnam.
