MUMBAI: Indian government bond yields traded lower on Thursday as US yields plunged after the Federal Reserve maintained a status quo on interest rates a day earlier, while its commentary led to a reduction in the chances of a rate hike next month.
The 10-year benchmark bond yield was at 7.3270% as of 10:00 a.m. IST, after ending at 7.3599% in the previous session.
“As expected, there was a gap-down opening for yields as an adjustment to the move in Treasuries, but we would be in thin range around the current benchmark levels for the rest of the day,” a trader said.
US yields fell after the Fed meeting, with the two-year yield comfortably below the 5% mark, and the 10-year trading near the crucial 4.70% handle.
The Fed kept rates unchanged as policymakers struggled to determine whether financial conditions may be tight enough already to control inflation, or whether the economy still needs to be restrained.
“We are not confident that we haven’t, we are not confident that we have” reached that sufficiently restrictive plateau, Fed Chair Jerome Powell told reporters.
The Fed’s message is that the current stance balances these two risks just about evenly.
Hence, the door to additional tightening won’t be closed entirely, but it would take some jarring data to justify another hike, DBS said in a note.
The market has tapered down the probability of more rate hikes, with the odds of such a move in December easing to 15%, from around 25% before the meeting.
India bond yields flat as investors await Fed guidance
Traders will now focus on a fresh supply of debt as New Delhi aims to sell 300 billion rupees ($3.61 billion) of bonds on Friday, including a new 50-year paper.
The ultra-long bonds will lower borrowing costs for the government as large insurance and pension funds are expected to scoop up the issue, fund managers and analysts told Reuters.
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