By Dharamraj Dhutia
MUMBAI, October 27 (Reuters) – Yields on Indian government bonds are expected to open lower on Thursday, following a sharp drop in US yields, while rising global oil prices may limit the decline.
The benchmark 10-year Indian government bond yield IN072632G=CC will likely be in the 7.35% to 7.41% range, a trader at a private bank said. The yield fell seven basis points to end at 7.4424% on Tuesday.
Indian financial markets were closed on Wednesday due to a local public holiday.
“There should be a lower open for yields of around five to six basis points as the move in US yields is very strong and we are back to 4% levels,” the trader said.
“Oil could act as a shock absorber, but with chances of $100 a barrel soon.”
US Treasuries have seen strong buying interest, with the yield on 10-year bonds back to 4.00%, down more than 30 basis points since last week on the weakness of the dollar and renewed speculation that the Federal Reserve may slow its pace of rate hikes.
The yield spread on three-month bills and 10-year Treasury bills US3MUS10Y=TWEB turned negative on Tuesday, on an intraday basis.
Fed funds futures forecast an 87% chance of a 75 basis point rate hike on Nov. 2 and a 38% chance of a similarly large hike in December, according to the FedWatch tool. CME Group.
Last week, the odds were close to 100% and 65%, respectively.
The Fed has already raised rates by 300 basis points since March.
Meanwhile, global oil prices rose, driven by record US crude exports and a weaker dollar. Crude exports reached 5.1 million barrels per day, a record. WHERE
** Brent futures LCOc1 was 0.3% higher at $95.95 a barrel, after rising 2.3% in the previous session
** 10-year US Treasury yield US10YT=RR was at 4.0069% and the two-year rating US2YT=RR at 4.4059%
** Reserve Bank of India to auction treasury bills worth 220 billion Indian rupees ($2.68 billion)
($1 = 82.0740 Indian rupees)
(Reporting by Dharamraj Lalit Dhutia; Editing by Neha Arora)
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