Fed guidance to shape India’s 10-year bond yield trajectory from 6.50% mark

MUMBAI: Indian government bond yields are likely to remain largely unchanged in early deals on Wednesday, as the market braces for the US Federal Reserve’s monetary policy decision and guidance on future easing later in the day.

The yield on the 10-year benchmark note is expected to be in the 6.48%-6.52% range, a trader said at a private bank. It closed at 6.4925% on Tuesday.

“Locally, the debt supply calendar is the next trigger, which is some time away, and hence all action is focused on Federal Reserve decision and more importantly on clarity about the quantum of rate cuts in October-December,” the trader said.

The Fed’s decision is due after Indian market hours, where a 25-basis-point rate cut is already factored in, with a thin possibility of a 50-bps move.

Market participants will also scrutinize the forward guidance and rate projections for signals on the likelihood of further cuts in 2025.

The odds of an aggregate of 75 bps of rate cuts from now through December stand at 74%, according to the CME FedWatch Tool.

Back home, traders will await fresh debt supply as New Delhi is scheduled to sell benchmark bond worth 300 billion rupees ($3.41 billion) on Friday, followed by the borrowing calendar for the second half before the end of September.

Bond traders have urged the Reserve Bank of India to cut the share of ultra-long federal bonds in the supply schedule and reduce weekly auction sizes, which could stretch the borrowing calendar until next March.