India bonds flat, major move likely only after US inflation data

Indian government bonds finished little changed on Wednesday, with traders waiting for the latest US inflation figures due later in the day, Business Recorder reported. The benchmark 10-year yield closed at 6.7776%, down from 6.7791% at the previous close. Yields and prices of bonds run in opposite directions, so that small drop in yield points to slightly firmer prices.

Local retail inflation for July rose to 4.45% from 4.38% in June, coming in below the 4.50% forecast in a Reuters poll. Oil prices dipped to roughly $88 a barrel after media reports, citing sources, said Washington and Tehran had agreed to extend a 60-day ceasefire that expires on August 17.

The US inflation report, released after Indian market hours, is expected to carry more weight, and a stronger reading may push Treasury yields higher. MUFG said in a note that the Federal Reserve now focuses more on inflation than the labour market, and expectations of an immediate Reserve Bank of India rate increase have faded after the central bank left rates unchanged and turned more dovish last week. Overnight index swap rates were broadly stable, with the one-year rate at 5.77%, the two-year at 5.96% and the five-year at 6.27%.