INDIA BONDS-Bond yields seen inching down tracking U.S. peers ahead of Fed minutes

BY Reuters | ECONOMIC | 11/22/22 09:42 PM EST

By Bhakti Tambe

MUMBAI, Nov 23 (Reuters) - India's government bond yields are expected to open a tad lower on Wednesday, tracking a fall in longer maturity U.S. Treasury yields but are likely to remain in narrow a band thereafter as investors remain cautious ahead of the U.S. Federal Reserve's latest policy meeting minutes.

The benchmark 10-year yield is likely to be in a 7.27%-7.32% band. The yield ended lower at 7.2852% on Tuesday.

Domestic yields will track U.S. Treasury yiels with a downward bias in early trading, Venkatakrishnan Srinivasan, founder and managing partner of debt advisory firm Rockfort Fincap said.

U.S. Treasury yields eased on Tuesday amid thin trading and lingering concerns over more COVID-19 infections in China, with investors waiting for clues on the outlook for inflation and monetary policy from the Fed minutes due later in the day.

Besides global factors, a shortfall in the supply of long-tenure bonds in state debt as well as corporate bonds will continue to push big investors to plow their funds into long-term government securities till they get some other opportunities of investment, Rockfort's Srinivasan said.

Meanwhile, oil prices rose on Tuesday after top exporter Saudi Arabia said OPEC+ was sticking with output cuts and could take further steps to balance the market.

Markets will continue to track global cues amid lack of domestic triggers, dealers said. KEY INDICATORS: ** Brent crude futures was 0.1% higher at $88.50 per barrel, after rising over 1% in the previous session ** 10-year U.S. Treasury yield was at 3.7578% and the two-year note at 4.5144% ** Reserve Bank of India to auction Treasury Bills worth 220 billion Indian rupees ($2.69 billion) ($1 = 81.7110 Indian rupees) (Reporting by Bhakti Tambe; Editing by Dhanya Ann Thoppil)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.