UST Yield Curve Show Sign of Bullish Steepening, Will G-Secs Follow?

Weekly Market Highlights:

1. The 10 year 2034 G-sec yield was stable at 6.85% over the week as FPI inflows crossed Rs. 1 Trillion mark in 2024.
2. Weekly Gsec auction cut-off for the 2029 and 2064 stood at 6.7825% and 7.0127% respectively.
3. 3M and 6M T-bill auction data yields were at 6.64 and 6.72% respectively, up by 2 bps on a weekly basis.
4. The INR Bonds high yield Index stood at 9.698% down 5 bps biweekly basis.
5. The FOMC is now more confident that price growth is approaching the 2% target, supporting the case for lower borrowing costs which would reduce the opportunity cost of holding non-interest-bearing assets like gold.
6. FED chair Powell in his Jackson Hole speech attributed the inflation surge to supply chain disruptions and rising commodity prices but noted that inflation has decreased to 2.5%, nearing the Fed’s 2% target, while the labor market has cooled, with the unemployment rate at 4.3%, up from early 2023 but still low historically.
7. The dollar index fell to its lowest level in 13 months after FED Chair Powell highlighted risks in the labor market and expressed confidence that inflation will return to the central bank's 2% target.
8. Bullish steepening seen in the US treasury yield curve in the past week as the 2 year, 5 year and 10 year yields fell by 14, 10 and 8 bps respectively.