Indian bond yields expected to show a slight decline

MUMBAI: Indian government bond yields are expected to move with a dipping bias in early deals on Tuesday, as chatter about one more rate cut from the central bank continue to support.

The yield on the benchmark 10-year bond is likely to trade between 6.29% and 6.32%, a trader at a private bank said, after closing at 6.2996% on Monday.

The 15-year 6.68% 2040 bond ended at 6.6105%.

“Though there is some move in U.S. Treasuries, local market will be completely unaffected by it, and like yesterday, we could see more movement in other longer duration papers rather than the benchmark and 2034 paper,” the trader said.

U.S. yields fell, with the 10-year yield moving below 4.35% amid worries over impact of tariffs.

Back home, a plunge in India’s retail inflation rate to 2.10% in June, the slowest pace in more than six years, has led to increased talk of an interest rate cut next month.

An estimated drop in inflation to a record low in July is further pushing up rate cut calls.

The central bank slashed its key interest rate by 50 basis points last month, while changing its stance to “neutral” from “accommodative”, which had fuelled speculation that the rate-cut cycle may already be over.

The next monetary policy decision from the central bank is due on August 6, with some not ruling out a rate action.

Downward revision in inflation opens up room for further easing when growth is showing a somewhat downside bias. August would be an appropriate time for a 25-bps cut, given the muted inflation scenario, analysts at ICICI Bank said in a note.