Indian bond yields may fall more, bottom out by Feb 2017, here’s why – 19 Nov 2016

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Yield on India’s benchmark 10-year bond may bottom out between December 2016 and February 2017. Data from the calendar 1999 shows bond yields in the US and India move in the same direction, though the US rate leads Indian rates by five to eight months.

Of late, Indian bond yield has eased to its lowest level since May 2009 on rising hopes that the Reserve Bank of India (RBI) may cut interest rates after softening of retail inflation. On November 18, the yield of the 10-year government bond stood at 6.43 per cent.

According to HDFC Securities, the US rates bottomed out in early July 2016. Going by that data, Indian yields could bottom out over the next three months.

Recently, the 10-year US bond yield moved from 1.45 per cent in July 2016 to 2.29 at last reading. The US dollar scaled to its highest level in almost 14 years against a basket of currencies on November 18, while US bond yields advanced on bets that US inflation and interest rates are headed higher.

Economic data for the US seems to justify a rate hike ‘relatively soon’, Fed Chair Janet Yellen said earlier this week.

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