MUMBAI: Indian government bond yields were largely unchanged in early trading on Wednesday as market participants awaited the US Federal Reserve policy’s outcome later in the day for further cues.
The benchmark 7.26% 2033 bond yield was at 7.0933% as of 10:10 a.m. IST, after ending the previous session at 7.1030%.
US Treasury yields climbed on Tuesday as a stable economy and positive data reduced the chances of a recession and raised the possibility of two more interest rate hikes this year.
Yields, however, eased on Wednesday.
“Any volatility in US yields could impact (Indian) yields during the day, but 7.10%-7.12% is a strong resistance zone. Traders would like to wait for the Fed’s commentary before taking fresh positions,” a trader with a state-run bank said.
If the benchmark yield breaks the 7.12% level, the next strong support is seen at 7.15%, according to traders.
The US rate futures market expects the hike on Wednesday - the odds of a 25 basis points (bps) hike are over 97% - to be the last this year, with the Fed holding until May 2024.
Indian bond yields seen largely unchanged as market awaits Fed policy
However, the chances of another rate hike in November have grown to about 33%, from about 26% a week ago, according to the CME’s FedWatch.
Back home, investors have pushed back rate cut expectations by at least a quarter to the middle of 2024 due to a recent pick-up in inflation.
The Reserve Bank of India has held rates in the last two meetings, indicating it would wait for inflation to align with its medium-term target of 4% before cutting rates.
The central bank’s next policy meeting is in August.
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