India bonds may edge up after Fed signals less-hawkish stance

MUMBAI: Indian government bonds may recover some of the losses logged over the last three sessions on Thursday, tracking a decline in US Treasury yields after the Federal Reserve’s latest interest rate cut and comments that were less hawkish than feared.

The benchmark 10-year yield is likely to drift in a 6.63% to 6.67% band, a trader with a private bank said. It ended at 6.6649% on Wednesday, the highest closing level for the 10-year paper in this financial year.

Bond yields rise when prices fall.

“After the Fed, we could see some buying support at the current levels, but domestically there is hardly anything to cheer,” the trader said.

The Fed reduced rates by 25 basis points and its new economic projections showed the median policymaker sees just one rate cut in 2026, the same outlook as in September.

Fed Chair Jerome Powell said the central bank’s next move was unlikely to be a rate hike, as it was not the base case in the policymakers’ new projections, which pushed Treasury yields down.

While US asset classes have taken a less-hawkish Fed message positively with mild bull steepening, India’s rates market may stay sticky to the bear-steepness, reflecting structural demand-supply mismatch, said Madhavi Arora, chief economist at Emkay Global Financial.

India’s 10-year benchmark bond yield has risen 15 basis points in the last three sessions, and is up 21 bps from the low hit on Friday after the Reserve Bank of India reduced the key repo rate and announced liquidity infusions.

The RBI will buy bonds worth 500 billion rupees ($5.56 billion) later in the day, which will include papers maturing from four to 25 years.