Indian bond yields rose, following their US counterparts, sentiment remains weak

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MUMBAI — Indian government bond yields are expected to trade higher when trading opens on Monday, extending gains fueled by the central bank’s interest rate hike and Friday’s hawkish comments, and following a surge in US Treasury yields.

The yield on the benchmark 10-year bond is expected to trade in a range of 7.32% to 7.38%, a private bank trader said. It closed 14 basis points higher at 7.3005% on Friday, posting the biggest single-day rise in three months.

“Sentiment has already weakened following the hawkish monetary policy decision as well as the comments, and rising US yields will further increase selling pressure,” the trader said.

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The Reserve Bank of India on Friday raised the key rate, or repo rate, by 50 basis points, the third increase in the current cycle, to cool stubbornly high inflation that has remained above its tolerance band for six consecutive months. .

US Treasury yields rose on Friday, with the 10-year yield climbing 16 basis points to end at 2.8400%, its biggest such move in nearly two months, after strong payrolls data not agriculture in the United States.

The US Treasury yield curve inverted 45 basis points after the data as the market began to expect another 75 basis point hike from the Federal Reserve in September.

Meanwhile, market participants will await the results of a government debt auction to gauge investor appetite. Indian states will seek to raise 138 billion rupees ($1.74 billion) in the auction. A weekly auction of central government bonds saw weak demand and higher-than-expected threshold yields on Friday.

Indian markets will be closed on Tuesday for a local public holiday.

KEY INDICATORS: * Brent futures down 0.2% to $94.7 a barrel

* Yield on ten-year US notes at 2.83% * Indian states will raise 138 billion rupees through the sale of bonds. ($1 = 79.3600 Indian rupees) (Reporting by Dharamraj Lalit Dhutia; Editing by Subhranshu Sahu)