The yield on India’s 10-year government security hovered around 6.76%, stabilizing after a rise in the previous session. Softer US labor market data and diminished expectations of a Federal Reserve rate hike in September supported demand for longer-duration Indian debt, even as higher oil prices curbed risk appetite.
US employers unexpectedly cut 23,000 jobs in July, against expectations of an 80,000 increase. This led investors to scale back the implied probability of a September Fed rate hike to 42%, from 55% prior to the data release. US Treasury yields also eased in response.
At the same time, Brent crude climbed 0.4% to $83.90 per barrel, its fourth consecutive daily gain, which weighed on sentiment toward Indian bonds amid lingering concerns over global inflation.
Last week, the Reserve Bank of India left its policy rate unchanged but cut its core inflation forecast by 40 basis points to 4.3% and trimmed its headline inflation projection by 10 basis points to 5%. Market participants are now awaiting Wednesday’s release of July CPI data, with inflation expected to edge up to 4.50% from 4.38% in June.
