Indian government bond yields remained largely unchanged despite strong domestic economic growth and the release of US economic data. The benchmark 10-year yield stood at 7.0682% as of 10:00 a.m., showing minimal movement from its previous close of 7.0764%.
India’s economy expanded by 8.4% in the October-December quarter, surpassing market expectations of 6.6% and accelerating from the previous quarter’s growth of 7.6%. The country revised its growth forecast for the fiscal year to 7.6% from 7.3%.
In contrast, the US personal consumption expenditures (PCE) price index increased by 0.3% last month, compared to a 0.1% gain in December. However, PCE inflation for the 12 months through January rose by 2.4%, the smallest year-on-year increase since February 2021.
Market analysts noted that while the US data didn’t have a significant impact, the high growth rate in India is expected to moderate in the coming quarters, reducing the likelihood of a major change in central bank policy.
Despite the strong headline growth figure, economists pointed out a more modest increase in India’s gross value added (GVA), suggesting a slower pace of underlying economic expansion. Nomura maintained its projection of 100 basis points of rate cuts starting from August, citing the slowdown in core GDP growth.
In February, the Reserve Bank of India opted to keep rates unchanged for the sixth consecutive time, emphasizing its commitment to achieving the 4% inflation target sustainably.
Meanwhile, the 10-year US bond yield experienced a slight decrease but remained above 4.25%, indicating that the PCE data had little impact on expectations of the Federal Reserve’s rate cut cycle.