The benchmark 7.26% 2033 bond yield ended at 7.0566%, lowest since June 28, after closing at 7.0758% on Monday. The benchmark yield has fallen by six basis points (bps) in last four sessions.
The five-year OIS rate was at 6.16%, and has plummeted by around 29 basis points from its recent high of 6.45%.
“There is no build-up in short positions and therefore, bond prices have been rallying,” said Pawan Somani, head of fixed income at Knight Fintech Research.
The 10-year U.S. yield has plunged by around 30 bps from its recent highs as market sentiment improved and was last trading around 3.76%. The decline in yields got a push after a softer-than-expected June inflation reading in world’s largest economy.
Markets are now closely watching Fed Chairman Jerome Powell’s tone at the U.S. central bank’s July 25-26 meeting. The odds of a 25-bps hike in July remain around 94%, but that of another hike after that have come down sharply.
Back home, market participants will look out for upcoming inflation print amid rising vegetable prices to gauge the Reserve Bank of India’s (RBI) rate action trajectory. India’s annual retail inflation rate rose to 4.81% in June, snapping four months of easing and erasing chances of any early rate cut.
“July domestic inflation print will be very crucial as full impact of price rise in vegetables will be seen,” Somani said.
The RBI maintained a status quo on rates in past two monetary policies and reiterated its commitment to bring inflation to the 4%-target level. The RBI’s repo rate currently at 6.50% and the next monetary policy is due in August
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