Indian government bond yields are anticipated to experience minimal changes at the start of the day on Tuesday, August 20, 2024. This cautious outlook comes after the central bank, i.e. the Reserve Bank of India warned of the potential need for a more careful monetary policy approach to address the high food price inflation.

According to a trader from a primary dealership, the benchmark 10-year yield is projected to fluctuate between 6.85% and 6.88%, compared to its previous closing rate of 6.8653%.

The trader also mentioned that significant movements are not anticipated for today. Instead, attention will be focused on the minutes from the central bank’s meeting, scheduled for release later this week.

The minutes from the RBI’s previous meeting, during which the bank maintained rates and its policy stance, are set to be released on Thursday. While most central banks are leaning towards easing their policies, the RBI concentrates on controlling food price-induced inflation, as indicated in its recent statements.

The RBI stated on Monday that if high food prices persist and threaten to spill over into broader inflation, a more cautious approach to monetary policy may be necessary.

Although retail inflation dropped to a five-year low of 3.54% in July, this was largely due to a base effect as food prices eased from previous highs.

In the meantime, US Treasury yields saw a slight decrease on Monday as market participants are awaiting Federal Reserve Chair Jerome Powell’s remarks at the Jackson Hole symposium later this week.

The minutes of the Fed’s July meeting will be disclosed on Wednesday. According to the CME FedWatch tool, traders have fully factored in a 25 basis point reduction in September 2024.

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