Decline in India bond yields seen capped after convoluted Fed policy

MUMBAI: Indian government bond yields are likely to start the session on Thursday with some declines, as the U.S. central bank hinted at more rate cuts in 2025.

Still, the decline in yields would likely be capped as the commentary from Federal Reserve chair Jerome Powell tilted towards the hawkish side.

The yield on the 10-year benchmark note is expected to move in the 6.45%-6.50% range, said a trader at a private bank. It closed at 6.4726% on Wednesday.

“There could be some opening dip in yields, but we will not be surprised if that is reversed immediately, at least for the 10-year and above maturity papers,” the trader said.

The Federal Reserve reduced interest rates on Wednesday for the first time since December and indicated more cuts would follow to halt any slide in the labour market.

Powell however said the Fed will be in a “meeting-by-meeting situation” regarding the outlook for interest rates.

“There wasn’t widespread support at all for a 50 basis point cut today,” Powell told reporters at a press conference.

The 10-year U.S. yield ultimately inched higher after briefly moving below the 4% mark after the Fed decision.

The odds of more 50 bps of rate cuts in 2025 rose to 82%, up from 74% before the decision, according to the CME FedWatch Tool.

In India, traders await fresh debt supply as New Delhi is scheduled to sell 300 billion Indian rupees ($3.42 billion) of the benchmark 10-year bond on Friday.