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INDIA BONDS-Bond yields break 2-day falling streak as 10-year U.S. yield hits 4%

09/28/2022 | 06:05am EST

MUMBAI, Sept 28 (Reuters) - Indian government bond yields ended higher for the first time in three sessions on Wednesday, as the 10-year U.S. Treasury yield hit 4% for the first time since April 2010, highlighting investor nervousness over high policy rates had intensified.

The benchmark Indian 10-year government bond yield ended at 7.3340%, after closing at 7.2915%. The yield had dipped 10 basis points in last two sessions.

Traders also await the Reserve Bank of India's monetary policy decision on Friday, and details of the government's borrowing plan for the rest of the fiscal, due in a few days.

"Rate action and guidance in monetary policy along with developments over index inclusion will continue to drive the markets," said Ritesh Bhusari, deputy general manager for treasury at South Indian Bank.

U.S. rate hikes and the resultant pressure on the rupee is likely to give the RBI reason to deliver a 50-basis-point rate hike on Friday, as the slim majority of economists in a Reuters poll predict, even as it tries to protect a recovery in growth.

The RBI has already raised rates by 140 basis points between May and August to tackle inflation that has stayed above its tolerance level for eight straight months through August.

The two-year U.S. Treasury yield, considered an indicator of interest rate expectations, was close to its highest level in 15 years. The 10-year Treasury yields climbed as high at 4.0190% before easing.

Last week, the Federal Reserve hiked rates by 75 bps for the third consecutive time. On Tuesday, Chicago Fed President Charles Evans said the central bank will need to raise rates by at least another percentage point this year, a more aggressive stance than he had previously embraced.

Meanwhile, traders also await the Indian government's borrowing calendar for October-March. Analysts expect the market will easily absorb the borrowings for the rest of this fiscal year, though at higher interest costs.

The government is scheduled to borrow a gross 5.86 trillion Indian rupees ($71.55 billion) in the period, which could increase by another 160 billion rupees after it failed to raise the planned amount from the sale of floating rate securities earlier. ($1 = 81.9010 Indian rupees) (Reporting by Dharamraj Lalit Dhutia; Editing by Savio D'Souza)


ę Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.02% 0.679 Delayed Quote.-6.20%
BRITISH POUND / US DOLLAR (GBP/USD) 0.03% 1.229 Delayed Quote.-9.40%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.01% 0.742 Delayed Quote.-5.91%
EURO / US DOLLAR (EUR/USD) 0.07% 1.054 Delayed Quote.-7.41%
INDIAN BANK 2.19% 282.05 End-of-day quote.102.19%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.11% 0.012297 Delayed Quote.-8.26%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.63% 0.64084 Delayed Quote.-6.84%
THE SOUTH INDIAN BANK LIMITED -0.30% 16.75 End-of-day quote.89.27%
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