MUMBAI, Mar 1 (Reuters): Indian government bond yields are likely to trend higher on Friday, as stronger-than-expected economic growth could encourage the central bank to continue its fight against inflation, delaying rate cuts.
The benchmark 10-year yield is expected to hover in a 7.05 per cent-7.10 per cent range, following its previous close of 7.0764 per cent, a trader with a private bank said.
India's economy grew 8.4 per cent in the October-December quarter, its fastest pace in one-and-half years, led by strong manufacturing and construction activity. The economy grew much faster than market estimates of 6.6 per cent and also quickened from 7.6 per cent in the previous three months.
Asia's third-largest economy revised its growth estimate for the current fiscal year to 7.6 per cent from 7.3 per cent.
Growth was faster than expected by the Reserve Bank of India (RBI), which means the central bank will see little urgency to cut rates while they await for comfort on inflation, Barclays said.
"While there is the capacity to ease monetary policy, in our view, we now push back our rate cut call from Q2 to Q3 (July-September)," Rahul Bajoria, MD and head of EM Asia at Barclays said in a note.
In February, the central bank kept rates unchanged for a sixth consecutive time and reiterated its commitment to meet 4 per cent inflation target on a sustainable basis.
Meanwhile, the 10-year US bond yield remained above 4.25 per cent, as the latest personal consumption expenditures price index did little to change rate cut expectations.
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