India bond yields end higher on hawkish commentary, data

Indian government bond yields ended higher on Wednesday as bets of aggressive rate cuts by the U.S. Federal Reserve eased following cautious comments from a central bank official, while higher inflation data in the UK also weighed.

India's benchmark 10-year yield ended at 7.1642%, after its previous close at 7.1460%.


"The fall in bond yields after softer core inflation has been somewhat reversed due to global factors," said Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership.

U.S. bond yields moved higher on Tuesday, reversing the recent bullish tone amid resistance to expectations of aggressive rate cuts.

The United States is "within striking distance" of the Federal Reserve's 2% inflation goal, but the central bank should not rush towards cuts in interest rates until it is clear lower inflation will be sustained, Fed Governor Christopher Waller said on Tuesday.

In November, Waller's comments had triggered talks of a policy pivot from the Fed, which further grew following a dovish guidance in its December policy.

The 10-year U.S. yield surged to 4.08% on Tuesday and stayed around the 4.05% mark in Asian hours on Wednesday, while the odds of a Fed rate cut in March eased to nearly 63% from 81% on Friday, according to the CME FedWatch Tool.

Meanwhile, Britain's annual rate of consumer price inflation sped up for the first time in 10 months in December, increasing to 4% from a more-than-two-year low of 3.9% recorded in November.

Local bond yields eased earlier this week after India's December core inflation declined, with some economists expecting the Reserve Bank of India (RBI) to ease its policy stance to 'neutral' in February amid declining inflationary trends.

The RBI has held rates steady since April 2023, following a 250-bps increase in the previous financial year as it fought high inflation. (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)