India bonds inch up after two-day selloff; Fed in focus

MUMBAI: Indian government bonds rose on Wednesday, after a two-day rout triggered by foreign investors unwinding positions in bonds and overnight index swaps, while declining prospects of further domestic interest rate cuts weighed on sentiment.

The benchmark 10-year yield was at 6.5949% as of 10:30 a.m. IST.

It ended at 6.6161% on Tuesday, the highest closing level for this financial year.

Bond yields move inversely to prices.

The 10-year benchmark bond yield climbed above the key 6.60% technical level on Tuesday, breaking out of the 6.45%–6.60% range it had held for the past three months.

Overseas investors and lenders have been net sellers for the past four sessions, while also aggressively paying in overnight index swaps, traders said, as they likely scaled back domestic rate-cut bets.

Foreign investors have net sold 77 billion rupees ($856.80 million) of bonds in the last four sessions, while overseas banks pared positions worth 97 billion rupees.

“Globally, yields have been rising and there was offshore paying in the OIS market, which weighed on bonds too,” said Alok Sharma, head of treasury at ICBC.

“Inclusion in Bloomberg’s bond index and more OMO announcements will be positive for bonds, but the budget can have a higher-than-expected debt supply, so the market is cautious,” he added.

Focus is now on the US Federal Reserve’s monetary policy decision due later in the day.

While the Fed is widely expected to deliver a rate cut, the market fears hawkish guidance and a slower pace of easing in 2026.