Indian bond yields seen easing on bets Fed hiking cycle ending

Indian bond yields seen easing on bets Fed hiking cycle ending

Indian government bond yields are expected to track U.S peers lower early on Thursday on rising bets that the U.S. Federal Reserve‘s rate hike a day before was its last for this cycle. The benchmark 7.26% 2033 bond yield is likely to be in the 7.06%-7.11% range after ending the previous session at 7.0965%, a trader with a state-run bank said.

“The Fed could not have explicitly guided that its rate hiking cycle is done, but for all practical purposes, market thinks there will not be any more hikes,” the trader said. U.S. yields dipped on Wednesday after the Federal Reserve raised interest rates by a widely expected 25 basis points (bps) and indicated another increase, but the market was not convinced with it.

The U.S. rate futures market has placed the odds of another hike in September meeting are 21%, up from around 14% before latest Decision. Back home, focus would be on fresh supply of bonds on Friday, wherein New Delhi will aims to raise 330 billion rupees ($4.03 billion) through the sale of bonds, which includes 140 billion rupees of benchmark paper.

Meanwhile, Reserve Bank of India‘s policy decision by the second week of August could act as the next major directional trigger.