MUMBAI: Indian government bond yields are expected to trend largely unchanged in opening deals on Thursday, as US Treasury yields stayed around previous day’s levels, while investor focus shifted to Federal Reserve’s monetary policy decision.
The benchmark 10-year bond yield is likely to move between 6.77% and 6.81%, compared with Wednesday’s close of 6.7949%, a trader with a private bank said.
The most liquid 7.10% 2034 bond ended at 6.8322% yield on Wednesday.
“The reaction to US Treasury yields has already happened, and market will focus on the Fed’s policy decision and future guidance for cues,” the trader said.
The Fed’s decision is due later in the day, wherein the market has priced in a 25-basis-point rate cut.
Interest rate futures are, however, pricing out rate cuts after Republican Donald Trump was elected as the president for a second non-consecutive term.
Futures are pricing in an additional 42 bps of cuts after November over the course of next three meetings from December to March, with odds of a cut in December easing to 70%, from 77% a day earlier.
The easing cycle for the Fed has become more muddled and between firm data and upside risks to growth, room for easing would become more constrained, DBS said in a note.
India bond yields to tail US peers higher amid US election outcome
Meanwhile, US yields rose on Wednesday and stayed elevated on Thursday, as Trump’s presidential election victory ignited bets on economic policy shifts that could boost deficits and inflation.
Trump swept back to power beating Democratic candidate Vice President Kamala Harris.
Analysts expects Trump’s policies on enacting higher tariffs on imports are likely to stoke inflation, thus putting upward pressure on US yields, and slow down the pace of rate cuts from the Fed.
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