India’s 10Y yield is trading steady today, despite decline in oil prices
Sonal Badhan,
Economist,
Bank of Baroda
Mumbai, 20 December, 2024: US macro data shows that economy continues to remain strong, giving further merit
to Fed’s higher for longer rates in CY25. GDP growth for Q3 was revised up to 3.1%
from 2.8% estimated earlier, backed by upward revisions to exports and private
consumption. Initial jobless claims for the week ending 14 Dec’24, fell by 22k from
the previous week to 220k (est.: 229k), signalling labour market strength. Existing
home sales jumped by 4.8% (MoM) to 4.15mn units (highest since Mar’24), despite
higher mortgage rates. Elsewhere in Europe, BoE decided to leave its policy rate
unchanged at 4.75%, but the spilt amongst members widened. Markets are pricing in
fewer rate cuts (upto two) in CY25, given continued increase in wage growth and
elevated services inflation. In Germany, Gfk consumer confidence shows sentiment
improving for Jan’25 (-21.3 from -23.1 in Dec’24), despite labour market concerns.
Barring Dow Jones (flat), other global indices ended lower. Investors monitored
the Fed's decision and hawkish outlook. US data (weekly jobless claims and Q3
GDP print) further supported this decision. Sensex ended in red led by sharp
losses in banking and consumer durable stocks. It is trading lower today while
other Asian indices are trading mixed.
Except Japan and China (flat), other global 10Y yields inched further up.
Upward revision to US Q3 GDP, and lower than expected jobless claims
reaffirmed fears that Fed will cut rates more slowly in CY25. BoE also seems
less willing to cut rates aggressively next year. India’s 10Y yield rose by 4bps,
tracking global cues. It is trading steady today, despite decline in oil prices.
