India bonds seen flat; 10-year yield to remain glued to 6.85%
By Dharamraj Dhutia
MUMBAI, Sept 10 (Reuters) -Indian government bond yields will continue to struggle for direction on Tuesday, as market participants await inflation prints for clarity on rate cuts from the Federal Reserve after a crucial jobs data failed to be the deciding factor.
The benchmark 10-year yield IN071034G=CC is likely to move between 6.84% and 6.86%, compared with its previous close of 6.8546%, a trader with a private bank said.
"Another boring day in terms of volatility is on the cards today, as nothing has moved, and going by the trend of the last few days, the benchmark yield should be stuck around 6.85% mark," the trader said.
U.S. Treasury yields were barely changed, with the 10-year yield holding around 3.70% mark, as odds of a larger rate cut from the Fed next week eased marginally.
The U.S. will release retail inflation print after Indian market hours on Wednesday, and the reading is expected at 2.6% on-year, and at 0.2% on a monthly basis, according to a Reuters poll
The Fed decision is due on Sept. 18.
Any decline in core CPI inflation could increase bets for a larger rate cut in September, while a rise would make it much difficult, MUFG said in a note.
Weaker August non-farm payroll data failed to offer a clear signal on the size of an expected rate cut.
The markets have fully priced in a rate cut of at least 25 bps, and expectations for a 50 bps move have dipped to 27% from 31% a day ago. FEDWATCH
Meanwhile, India's retail inflation probably held below the Reserve Bank of India's 4% medium-term target for second month in August due to a moderation in food price rises due to last year's high base, a Reuters poll showed.
The data is due after market hours on Thursday.
KEY INDICATORS:
** Brent crude futures LCOc1 were up 0.1% at $71.90 per barrel, after rising 1.1% in previous session
** Ten-year U.S. Treasury yield US10YT=RR at 3.7098%, two-year yield US2YT=RR at 3.6853%
** Seven Indian states to raise 137.90 billion rupees ($1.64 billion) via sale of bonds
($1 = 83.9600 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala
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