By Dharamraj Dhutia
MUMBAI (Reuters) – Indian government bond yields are likely to ease marginally early on Monday, mirroring U.S. peers, while the rescue of a European lender and dipping odds of a rate hike by the Federal Reserve also aid.
The 10-year benchmark 7.26% 2032 bond yield is expected to stay in the 7.33%-7.38% band after closing at 7.3511% on Friday, a trader with a private bank said.
“There should be some marginal dip in opening trades to factor in the Treasury moves, but we are in for yet another volatility-heavy session after the recent developments in the global banking scene,” the trader said.
On Sunday, the UBS Group AG sealed a deal to buy Credit Suisse for $3.23 billion, a historic move that was followed by global central banks assuring markets of adequate dollar liquidity via standing swap lines. The deal is backed by a Swiss guarantee and is expected to close by the end of 2023.
Soon after the deal, the Federal Reserve, European Central Bank and other major central banks came out with statements to reassure markets.
The Fed offered daily currency swaps to ensure banks in Canada, Britain, Japan, Switzerland and the euro zone have the dollars needed to operate.
The move came ahead of the Fed’s policy decision due Wednesday. Fed funds futures are now pricing in a 60% chance for a 25 basis-point hike in March and 40% for rates being left unchanged. The odds had increased to over 80% last week for a 25-bps hike.
U.S. yields rose in choppy trading on Monday but had ended sharply lower on Friday, with the two-year and 10-year yields remaining below the key 4% and 3.50% levels, respectively.
Back home, traders will also await the borrowing calendar for April-September, which is likely to be announced next week, followed by the Reserve Bank of India’s policy decision the week after.
KEY INDICATORS:
** Brent crude futures contract was up 0.4% at $73.25 per barrel after falling 2.3% in the previous session
** 10-year U.S. Treasury yield was at 3.4847% and the two-year note at 3.9646%
(Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
