Indian bond yields seen higher as strong growth may delay rate cuts

Indian government bond yields are expected to rise marginally in the early session on Thursday, after stronger-than-expected economic growth in January-March brought focus on the central bank's monetary policy decision next week.

The 10-year benchmark 7.26% 2033 bond yield (IN072633G=CC) is expected to be in the 6.98% to 7.04% range, after closing at 6.9874% in the previous session, a trader with a private bank said.

"Though we should not see any major impact from growth data, there could be marginal selling pressure, as strong growth could delay the incoming of easy monetary policy days," the trader said.

India's economic growth accelerated to 6.1% in the March quarter from a year earlier, beating a forecast of 5.0% in a Reuters poll of economists, as recovery in private investment and domestic consumption offset softening global demand.

The strong growth brings back the focus on the Reserve Bank of India's (RBI) monetary policy decision due on June 8, and its likely trajectory.

"From a monetary policy perspective, the stellar GDP print reinforces our expectation that RBI is likely to remain on a prolonged pause (till December 2023)," IDFC First Bank said in a note.

But some economists now expect growth to slow down, with Barclays pegging the current year's growth at 6.3%, while Capital Economics expects growth to likely slow over the coming quarters.

KEY INDICATORS:

** Brent crude futures BRN1! up 0.5% at $73.00 per barrel, after falling 1.2% in previous session

** 10-year U.S. Treasury yield US10Y at 3.6694%, two-year note yield (US2YT=RR) at 4.4400%