Indian bonds gain as soft US inflation cools Fed rate hike bets

Indian government bonds gained after softer-than-expected US June inflation data cooled expectations of near-term Federal Reserve rate hikes, pulling the benchmark 6.94% 2036 bond yield down to 6.7703% from a three-week high of 6.7945%. The probability of a 25-basis-point Fed hike in July fell sharply to 17 percent from 42 percent, while September hike odds eased to 60 percent from 75.1 percent. Foreign investors have poured about 4.2 billion dollars into Indian bonds under the fully accessible route since June 1, with anticipated Bloomberg Global Aggregate Index inclusion further supporting sentiment despite June retail inflation breaching the RBI target at 4.38 percent.