The yield on the US 10-year Treasury note rose nearly 7 basis points to 4.45% on Friday, following a jobs report that signaled a cooling, yet resilient, labour market, slightly tempering expectations for Federal Reserve rate cuts. The US economy added 137,000 jobs in the past month, modestly exceeding forecasts, but data for the previous two months was revised sharply lower. Also, the unemployment rate held steady at 4.2%, in line with expectations while average hourly earnings rose by 0.4%, surpassing the projected 0.3%. The figures reinforced the Fed’s cautious stance on maintaining current rates. As a result, the probability of a September rate cut declined to around 75%, down from full pricing earlier in the week. Meanwhile, markets remained attentive to trade war developments, as a call between President Trump and Chinese President Xi yielded few concrete details.
The yield on the 10-year Indian G-Sec eased further to just below 6.24%, its lowest since September 2021, as traders assessed the latest policy move by the Reserve Bank of India (RBI). Benign inflation gave the central bank room to act, prompting a surprise 50 basis point cut to its policy rate to 5.5% and a reduction in the cash reserve ratio, aimed at boosting liquidity and shielding the economy from global volatility. The RBI had revised its inflation outlook to 3.7% in the current financial year, down from its earlier figure of 4%, while maintaining its full-year GDP estimate at 6.5%. Meanwhile, the RBI shifted its policy stance from "accommodative" to "neutral," with Governor Malhotra noting that future decisions will be data-dependent. The central bank has been delivering liquidity injections to commercial banks in response to tightened financing conditions and depleted reserves caused by its rupee defense.
