India bonds set to open little changed ahead of local, US inflation data

Business Recorder reported that Indian government bonds are likely to show little movement at the open on Wednesday, with traders waiting on retail inflation releases from India and the United States. Those readings are seen as a guide to where interest rates may head. A trader at a private bank expects the benchmark 6.94% 2036 bond to trade between 6.76% and 6.80%, having closed at 6.7791% on Tuesday.

The trader said the benchmark yield appears unlikely to hold above 6.80% for long, so trading should stay within a range with inflation in focus. India's retail inflation figure is due later in the day, and a Reuters poll expects it to rise to 4.50% in July from 4.38% in June. Market participants are expected to focus more on the US figures, which come out after Indian trading hours.

Brent crude held near $90 per barrel in Asian trade after climbing almost 6.5% over the previous two sessions, as doubts grew over a peaceful settlement between the US and Iran, which have been at war for five and a half months. Higher oil prices could lift inflation and put pressure on India's fiscal balance, current account and currency, since India ranks third globally among crude buyers. US price pressures have lifted the market-implied odds of a Federal Reserve rate hike in September to an even chance, while the 10-year Treasury yield sits near 4.70%.