MUMBAI: Indian government bonds ended nearly flat on Wednesday, as traders awaited the U.S. Federal Reserve’s monetary policy decision due later in the day, with a rate cut for December already priced in.
The yield on the benchmark 10-year note ended at 6.5354%, after closing at 6.5357% on Tuesday. Bond yields rise when prices fall.
“There has been hardly any volume in the last few days, with narrow moves in bond yields, but we expect the trend to change for the next could of days,” a trader with a state-run bank said.
Daily average trading volumes have nosedived in the last five sessions, dropping 55% to 349 billion rupees ($3.97 billion) from 770 billion rupees in the preceding five days, data showed.
Meanwhile, the Fed’s policy outcome is due after Indian market hours, with investors keenly waiting for Chair Jerome Powell’s address to gauge the probability of further rate cuts, especially in December.
Market participants see a 91% likelihood of a December rate cut, according to CME FedWatch Tool.
A U.S.-China trade deal and lack of economic indicators amid a U.S. government shutdown can still put the rate-easing track in jeopardy, traders cautioned.
“Markets are waiting for the FOMC meeting later tonight and any hints from Chair Powell on the direction of rates, coupled with details on a possible Trump-Xi meeting,” MUFG said in a note.
RATES
India’s overnight index swap rates (OIS) were little changed as welland volumes remained shallow as traders await the Fed outcome.
The one-year OIS rate ended at 5.465% and the two-year rate closed at 5.415%. The five-year swap rate settled at 5.66%.
American Dollar Exchange Rate