Govt bond yields end flat as traders eye US Fed rate decision, outlook

Indian government bond yields ended little changed on Wednesday, ahead of the monetary policy decision from the US Federal Reserve and the accompanying guidance for 2025. 

The benchmark 10-year bond yield ended at 6.7465 per cent , compared with the previous close of 6.7588 per cent. 

"Market is waiting for the Fed meeting, and guidance and dot plot projections would be the thing to watch out for in the decision," said VRC Reddy, treasury head at Karur Vysya Bank. 

The Fed's policy decision will come after Indian markets close on Wednesday. While the US central bank is widely expected to cut interest rates by 25 basis points, markets are wary of an uncertain outlook and cautious commentary for 2025. 

 

With inflation in the world's largest economy remaining comfortably above the central bank's 2 per cent target, markets fear the Fed may cite inflationary pressures to indicate a pause in rates in the early part of the next year. 

The debt market will also focus on the Fed's quarterly economic projections and the updated dot plot for 2025. The dot plot released in September showed a policy rate of 3.4 per cent by the end of 2025. 

US rate futures have priced in about two rate cuts in 2025, according to LSEG calculations. 

The odds of a 25-bp cut were over 95 per cent , while that for a similar move in January stood at a mere 16 per cent , according to the CME FedWatch Tool. 

Locally, investors are waiting for debt supply and minutes of the Reserve Bank of India's December meeting, both due on Friday. 

The RBI maintained status quo on policy rates earlier this month but infused liquidity into the banking system through a cut in banks' cash reserve ratio. 

Traders remained vigilant regarding the local currency, which continued to decline to record lows, while cash shortage within the banking system weighed on sentiment.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)