India bond yields may inch higher as US yields move up

A likely drop to a record low in July is prompting calls for at least one more rate cut this year
| Photo Credit:
John Kevin

Indian government bond yields may rise in early deals on Wednesday, tracking a spike in U.S. Treasury yields as elevated inflation suggests that the Federal Reserve will remain cautious towards monetary policy easing.

The yield on the benchmark 10-year bond is expected to trade between 6.29% and 6.33%, a trader at a private bank said, after closing at 6.3090% on Tuesday. The five-year 6.75% 2029 bond ended at 5.9980%.

“There could be some upward move in the opening trades, but again we are not forecasting any large swings and overall trend will continue to be sideways for today and tomorrow,” the trader said.

U.S. yields jumped, with the 10-year yield nearly hitting the crucial 4.50% mark, while the 30-year yield rose above 5.00%.

Data showed the retail inflation increased 0.3% last month after edging up 0.1% in May, the largest monthly rise since January. In the 12 months through June, the inflation climbed 2.7% after rising 2.4% in May.

A Reuters poll had forecast retail inflation would climb 0.3% and 2.6% on monthly and annual basis, respectively.

The odds of a rate cut from the Fed are nearly zero for July and have reduced to 55%, down from 65% a week ago.

“Higher tariffs (are) still in the pipeline from here… markets could be rightly pricing out the near-term chance of Fed Funds rate cuts,” MUFG said in a note.

Back home, India’s retail inflation slowed to a more than six-year low of 2.10% in June, down from 2.82% in May.

A likely drop to a record low in July is prompting calls for at least one more rate cut this year. RATES India’s overnight index swap rates (OIS) are expected to see paying pressure tracking elevated Treasury yields.

The one-year OIS rate ended at 5.53% and the two-year OIS rate at 5.50%. The liquid five-year finished at 5.73%. KEY INDICATORS: ** Benchmark Brent crude futures rose 0.2% to $68.90 per barrel after easing 0.7% in the previous session ** Ten-year U.S. Treasury yield was at 4.4753%; two-year yield at 3.9440% ** The RBI will auction treasury bills worth 200 billion rupees ($2.33 billion) ($1 = 85.9560 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Rashmi Aich)

Published on July 16, 2025