Indian bonds jump after Trump’s speech fails to provide any direction, no plans of fiscal stimulus

The Indian government bonds jumped Monday after the United States President Donald trump failed to provide any particular direction to the markets in the country’s 45th Presidential Inaugural ceremony held on Friday.

Also, the President failed to shower evidences of a spending on fiscal stimulus, that further disturbed markets.

The yield on the benchmark 10-year bonds, which moves inversely to its price, plunged 3 basis points to 6.44 percent, the yield on super-long 30-year note fell 1-1/2 basis points to 7.02 percent while the yield on short-term 2-year note moved down 1 basis point to 6.32 percent by 07:20 GMT.

In his much anticipated inauguration speech, President Trump largely focused on the main principle that won him the election: a strong anti-establishment message and putting America above all else.

"Every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs," ANZ reported, citing Trump’s original speech.

He further added that protectionism will lead to great prosperity and strength and that he will fight for it thoroughly, putting his country on the top priority every time.

"Trump speech turned out to be a non-event, as there was nothing for the markets in his comments that could have had an impact and so we are seeing some rally today. There is no major trigger until the Budget next week, and we may see the benchmark yield trading in thin range until then," Reuters reported, citing a trader with a primary dealership.

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, market participants are looking forward to the Reserve Bank of India’s first bi-monthly monetary policy meeting of 2017, scheduled to be held on February 7.

Meanwhile, the 30-share benchmark Sensex traded 0.09 percent higher at 27,059.07, while the 50-share benchmark Nifty futures traded 0.07 percent or 5.80 points up at 8,355.40 by 07:20 GMT.