MUMBAI, Oct 17 (Reuters) – Indian government bond yields fell in early trades on Monday as minutes from the latest monetary policy meeting were interpreted as a softer outlook, allaying fears of currency hikes. aggressive rates.
However, rising US Treasury yields prevented a steeper decline in yields.
The yield on benchmark 10-year Indian government bonds was 7.4239% at 0440 GMT. The yield ended at 7.4696% on Friday and has risen 30 basis points over the past five weeks.
“The pacifist turn of the external members will force central bank officials to also consider this line of thinking at their next meeting,” said a trader at a public bank.
The Reserve Bank of India’s Monetary Policy Committee (MPC) may rely more on the data to decide on the key interest rate going forward, although policymakers appeared divided on the future path of rate hikes, the minutes of its September meeting suggested on Friday.
Two external members, Ashima Goyal and Jayant Varma, showed their preference for a lessening of the rate hike cycle going forward.
“A pause is needed after this rise as monetary policy acts with lags,” Varma wrote in his minutes.
The MPC raised the benchmark repo rate by 50 basis points in September, the fourth straight increase to tame stubbornly high inflation.
Retail price inflation accelerated to a five-month high of 7.41% in September, its ninth straight reading above target.
Nomura said the minutes signaled “some likelihood” that MPC would choose to undertake one final rate hike in December and then pause.
Meanwhile, Barclays expected further rate tightening, but perhaps less than 50 basis points.
“We now expect the RBI to take a 35 basis point rate hike at the December MPC to take the repo rate to 6.25%, before moving to a neutral stance,” the statement said. India’s chief economist Rahul Bajoria.
QuantEco Research also expects another 35 basis point rate hike before the central bank becomes reactive rather than proactive, they said.
Kotak Mahindra Bank said the minutes reaffirmed the view of softer rate hikes given uncertainties emanating from the global outlook.
Meanwhile, US yields rose, with the 10-year yield remaining above the 4.00% mark, as high inflation raised market expectations that the target interest rate for the Federal Reserve will peak in 2023 at nearly 5%.
U.S. federal funds futures forecast two more rate hikes of 75 basis points in November and December, on top of the 300 basis point hikes since March. (Reporting by Dharamraj Lalit Dhutia; Editing by Neha Arora)
