Indian bonds gain as Fed Sep rate hike fades after weak employment report

The Indian bonds gained Tuesday as the United States Federal Reserve September rate hike faded after weaker than expected August non-farm payroll result.

The yield on the benchmark 10-year bonds, which moves inversely to its price, remained fell 2-1/2 basis points to 7.096 percent, the 5-year note yield also dipped 1-1/2 basis points to 6.992 percent, the super-long 30-year Treasury yield fell nearly 2 basis points to 7.250 percent and the short-term 2-year note yield slid 1-1/2 basis points to 6.821 percent by 07:00 GMT.

The August Labor Department employment situation report revealed a weaker +151k increase in non-farm payrolls, below market expectations for a +180k increase, as compared to the revised +275k result that occurred in July (previous was +255k).

This comes alongside no change in the unemployment rate at 4.9 percent, above expectations for a 4.8 percent result. Despite the weaker than expected headline result, this report shows lingering support for employment conditions.

Nevertheless, maintained improvement needs to be seen in order to alleviate caution on behalf of the FOMC regarding concerns elsewhere. Hence, we see this result as likely to provide enough weight to support the Fed leaving rates unchanged at the September FOMC meeting.

Last week, India’s second quarter GDP growth slows to 7.1 percent q/q, compared to 7.9 percent in January-March quarter driven by the slowdown in mining, construction and farm sectors. This was the lowest print recorded in last six quarters.

Meanwhile, the Sensex rose 1.06 percent or 302.46 points to 28,834.57 and Nifty-50 futures traded 1.02 percent higher or 9.10 points at 8,935.50 by 07:20 GMT.