Indian bond yields fall to 2-1/2 month lows; rupee strongest in 3 weeks

Ioneer

29/07/2022 06:23

By Swati Bhat
    MUMBAI, July 29 (Reuters) - India's benchmark 10-year bond
yield dropped to its lowest level in two and half months on
Friday, tracking the drop in its U.S. counterparts, while the
rupee strengthened to its highest in nearly three weeks in
response to broad dollar losses.
    The 10-year bond yield  IN065432G=CC  was trading at 7.2645%
by 0506 GMT, after falling to 7.2527% earlier, its lowest since
May 12. It had ended at 7.3316% on Thursday.
    The partially convertible rupee  INR=D3  was trading at
79.43/44 to the dollar, stronger than Thursday's close of
79.7550. In early trade it rose to a high of 79.34, its
strongest since July 11.
    The dollar languished near a six-week low against the yen
amid a sharp retreat in Treasury yields after investors
interpreted a shrinking U.S. economy as one more reason for the
Federal Reserve to ease off the tightening pedal.  USD/ 
    Most Asian currencies also rose against the dollar.
 EMRG/FRX  The domestic share markets  .NSEI  and  .BSESN  were
both trading up around 0.5% each. 
    "With the Fed having stuck to a 75 bps hike and concerns of
a global recession still looming, the RBI may announce a modest
25-35 bps increase in the repo rate next week," a senior trader
at a private bank said.
    "We will see the 10-year move in a 7.20% to 7.35% range
until (then)," he added.
    U.S. Treasury yields fell overnight after data showed the
economy contracted again in the second quarter, suggesting that
the Federal Reserve may not need to be so aggressive to cool
inflation.  US/ 
    "We expect the RBI's monetary policy committee to vote
unanimously for a 35 bp rate hike during next week's policy
review meeting," economists at Barclays said in a note.
    "While inflation is likely to remain elevated in the near
term, we think the MPC may acknowledge that price pressures have
peaked, and note the favourable tailwinds by reducing its
inflation forecasts, albeit marginally," they added.
    India's retail inflation remained painfully above the 7%
mark and beyond the central bank's tolerance band for the sixth
month in a row in June but has shown an easing bias over recent
months.  urn:newsml:reuters.com:*:nL1N2YT0T3

 (Reporting by Swati Bhat; Editing by Kim Coghill)
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