Indian government bond yields fell modestly in early trade on Wednesday, matching US Treasury yields following weak retail sales figures. As of 10:25 a.m. IST, India's benchmark 10-year yield was 6.9675 percent, up from 6.9789 percent at the previous closing.
"For the benchmark bond yield to break the current 6.97 percent-6.98 percent zone, we will need something big," said a trader with a primary dealership.
US yields fell on Tuesday after data revealed that retail sales in the world's largest economy were lower than predicted in May, bolstering predictions that the Federal Reserve will begin lowering interest rates this year.
Philadelphia Fed President Patrick Harker forecasts only one rate decrease in 2024, citing slower but above-trend economic growth, a minor rise in the unemployment rate, and a "long glide" back to the inflation target as his base case.
The futures market is pricing in two 25 basis point (bps) rate cuts in 2024, despite the Fed reducing its prediction to just one 25 bps drop this year, down from three in March, according to the CME FedWatch tool.
Back home, traders are waiting for the minutes of the Reserve Bank of India's (RBI) most recent policy meeting, which is scheduled on Friday. The central bank has maintained the status quo on rates and its stance. Despite mounting calls for a shift in monetary policy, RBI Governor Shaktikanta Das said on Tuesday that India should avoid "adventurism" and remain focused on getting inflation down to the target of 4 percent.
