India 10-year bond yield near 30-month low as US peers, oil prices fall

Focus, however, remained on U.S. inflation data, due at 6 p.m. IST (1230 GMT).

The benchmark yield ended at 6.8271%, its lowest level since March 31, 2022, compared with a previous close of 6.8510%.

“A sharp fall in U.S. yields and oil prices led to a decline in Indian bond yields, but today’s inflation data will determine the further trajectory of local, as well as global bond yields, in the near term,” a dealer with an international bank said.

Global oil benchmark Brent crude futures settled at their lowest since December 2021 on Tuesday after OPEC+ revised down its demand forecast for this year and 2025, offsetting supply concerns from Tropical Storm Francine.

Falling oil prices can help India’s retail inflation as it is a major oil importer, and may make the Reserve Bank of India’s 4% target easier to achieve. “Inflation is expected to ease, thanks to a strong monsoon that might reduce food price pressures, while core inflation is likely to remain stable,” Mirae Asset Mutual Fund said in a report. Retail inflation probably held below the RBI’s 4% medium-term target for a second month in August, a Reuters poll showed. The inflation data, due after market hours on Thursday, is also on investors’ radar.

“A shift in domestic monetary policy may occur in Q4 FY25, while a change in US monetary policy might be seen in the September or December 2024 meetings,” the note said.

Rates futures traders were assigning a 67% probability to a 25-bps cut at the Fed’s Sept. 17-18 meeting. Chances of a deeper, 50 bps cut were seen at 33%, up from 30% on Monday.

Meanwhile, U.S. Treasury yields declined on Wednesday, pushing benchmark 10-year yields to a new 15-month low, as the probability of a win in the November presidential election by Democrat Kamala Harris rose after a televised debate with Republican Donald Trump.