INDIA BONDS-India bonds set to open lower on hawkish Fed commentary

Reuters
2025/10/30
INDIA BONDS-India bonds set to open lower on hawkish Fed commentary

By Khushi Malhotra

MUMBAI, Oct 30 (Reuters) - Indian government bonds are expected to edge lower in early deals on Thursday, mirroring U.S. Treasuries, after comments from Federal Reserve Chair Jerome Powell dampened hopes of a December rate cut.

The yield on the benchmark 10-year note IN063335G=CC may swing between 6.52% and 6.56%, a trader at a private bank said, after ending Wednesday at 6.5354%.

On Wednesday, the Fed lowered interest rates by 25 basis points for the second time this year, bringing the benchmark overnight rate down to 3.75%-4.00%.

At a press briefing after the decision, Powell said Fed officials struggled to reach a consensus on the future trajectory of monetary policy, noting that further easing in December "is not a foregone conclusion."

"The market was already lacking positive cues, and now the Fed's hawkish approach could make things worse by reducing expectations of further rate cuts domestically," a trader at an AMC said.

"The 10-year yield could test 6.55%."

The Reserve Bank of India's policy minutes had shown room for rate cuts earlier this month, as inflation outlook remained benign.

However, bond market sentiment has been unsettled by expectations that ongoing trade negotiations could lead to lower U.S. tariffs on Indian exports, potentially limiting the room for future policy easing.

Investors will also watch the RBI's 320 billion-rupee ($3.62 billion) bond sale on Friday for cues on demand.

RATES

India's overnight index swap rates $(OIS)$ are expected to rise in early trading, tracking a jump in U.S. Treasury yields.

The one-year OIS rate INR1YMIBROIS=CC ended at 5.4650% and the two-year rate INR2YMIBROIS=CC at 5.4150% on Wednesday. The five-year swap rate INR5YMIBROIS=CC was barely changed at 5.66%.

KEY INDICATORS:

** Benchmark Brent crude futures LCOc1 fell 0.55% to $64.56 per barrel, after easing 0.81% on Wednesday

** Ten-year U.S. Treasury yield US10YT=RR at 4.0660%; two-year yield US2YT=RR at 3.5878%

** RBI to conduct overnight variable rate repo auction for 1 trillion rupees

($1 = 88.1950 Indian rupees)

(Reporting by Khushi Malhotra; Editing by Sumana Nandy)

((Khushi.malhotra@tr.com))

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