Bond yields decline in early trade

13 Mar 2023 , 11:45 AM

The yield on 10-year bonds decreased by 5 basis points to 7.37% from its previous closing, while the yield on 5-year bonds decreased by 11 basis points to 7.3%. In line with its US counterparts, India’s short- and long-term bond yields plunged on Monday as a result of the Federal Reserve’s anticipated pause in raising interest rates.

From its previous closing, the yield on the 10-year bond decreased by 5 basis points to 7.37%, while the yield on the five-year bond decreased by 11 basis points to 7.3%. Bond yields and prices follow different trajectories.

During the second session, the yield on US 10-year bonds decreased. It lost almost 8 basis points on March 9 and more than 20 bps the following day before falling to a one-month low of 3.69%. The US dollar index dropped for a third session, dropping more than 5% over the previous three.

In the lead-up to the consumer price inflation print that is due later today, these forecasts grew. It was anticipated that core inflation, which does not include volatile food and energy prices, would continue to be sticky. Yet while the government withholds data on core inflation, some experts believe it must have stayed above 6% in February, according to Reuters.

There is less concern about a rate increase of 50 basis points in the March meeting. According to the CME Fed watch toll, there is a 10% chance that the federal funds target will increase by 50 basis points from its reading on Friday. On March 22, the US Fed will reveal its upcoming interest rate decision.

In February, the US created more jobs than was anticipated. According to the US Labor Department, employers added 311,000 jobs in February, down from a revised 504,000 in January. The figures come days after Federal Reserve Chair Jerome Powell issued a warning that the US central bank is ready to accelerate the pace of rate increases and may even raise rates higher than expected if necessary to control persistent inflation.

Experts anticipate that the RBI will raise rates at its meeting in April and then take a break through the end of 2023. The central bank will raise its benchmark interest rate by 25 basis points to 6.75% in April before pausing until the end of 2023, according to a Reuters poll.

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