The Government Securities (G-Secs) market perked up on Thursday, shrugging off the higher domestic retail inflation print for June even as it tracked the decline in US Treasury yields.
In the domestic bond market, yield of the 10-year benchmark paper (7.26 per cent 2033 GS) thawed about 4 basis points to close at 7.07 per cent (previous close: 7.11 per cent), with its price rising about 30 paise to close at Rs 101.2775 (Rs 100.9825).
Bond yields and prices are inversely co-related and move in opposite directions.
“US inflation reading for June at 3 per cent seems to be moderating towards the Fed’s target rate of 2 per cent.…So, US 10-year Treasury has rallied. Its yield is back to 3.86 per cent level from 4.06 per cent level earlier. Our market mirrored the rally in US Treasuries.
“Our inflation is not too high. We are still in the comfort zone of 4-6 per cent. At this point of time, our debt market is taking cues from the US market. That is why it rallied along with the US market,” Ajay Manglunia, MD & Head, Investment Grade Group, JM Financial.
Retail inflation up
India’s retail inflation print for June came in higher at 4.81 per cent against 4.31 per cent in May 2023 on spike in vegetable prices
Venkatakrishnan Srinivasan, Founder and Managing Partner, Rockfort Fincap LLP, emphasised that the trigger for the rebound in G-Secs was the rally in US Treasuries, which came on the back of a thaw in US retail inflation.
“The market was just looking for a positive trigger. Now, that trigger has come in the form of softer retail inflation in the US, which in turn is giving hopes the Fed may not hike rates,” he said.
Venkatakrishnan expects the 10-year G-Sec to trade in the 7.05 per cent to 7.15 per cent range over the next one week.