Indian 10-year bond yields hit 4-week high on Fed Chair Yellen’s hawkish remarks

The Indian 10-year government bond yields hit 4-week high Thursday, following hawkish comments delivered by the Federal Reserve Chair Janet Yellen late Wednesday. Also, investors are awaiting the government bond auction scheduled for Friday.

The yield on the benchmark 10-year bonds, which moves inversely to its price, rose 2-1/2 basis points to 6.48 percent, the yield on super-long 30-year note gained 1-1/2 basis points to 7.05 percent while the yield on short-term 2-year note also moved over 1 basis point higher to 6.33 percent by 08:35 GMT.

The central bank governor mentioned that the US is near full employment and with inflation figures stabilizing, there is need for gradual Fed tightening, although she did not mention the exact timing of an interest rate hike.

Further, the Government of India has announced the sale of following bonds amounting to Rs 110 billion on 20th January 2016 through multiple price-based auction, where up to 5 percent of the notified amount of the sale of the stocks will be allotted to eligible individuals and Institutions in the auction.

It is worth noting that the benchmark 10-year yields fell nearly 160 basis points to 6.18 percent in 2016 as subdued inflation and negative impact of demonetisation raised expectations for the RBI rate cut. We at FxWirePro expect this is also likely to continue even in 2017.

Lastly, Yellen is scheduled to speak at the Stanford Institute for Economic Policy Research in San Francisco later today.

Meanwhile, the 30-share benchmark Sensex traded 0.20 percent higher at 27,310.88, while the 50-share benchmark Nifty futures traded 0.08 percent or 7.30 points up at 8,424.45 by 08:40 GMT.