India bond yields seen little changed, all eyes on Fed decision
By Dharamraj Dhutia
MUMBAI, Dec 17 (Reuters) -Indian government bond yields are expected to be largely unchanged on Tuesday, with the benchmark yield in touching distance of a key level, as investors' focus remains on the U.S. Federal Reserve's monetary policy decision.
The 10-year yield IN067934G=CC is likely to move between 6.73% and 6.76%, a trader with a private bank said, compared with its previous close of 6.7430%.
"Benchmark bond should find some buying support at around 6.75% level, and direction on either side of this level would be visible only after the Federal Reserve's monetary policy decision," the trader said.
The Fed's decision is due on Wednesday. While the central bank is widely expected to cut interest rates by 25 basis points, markets are fearing an uncertain outlook going into 2025.
The Fed is expected to say it is in no rush to cut rates further, even though inflation remains above its 2% annual target, and the labour market remains relatively strong, analysts have said.
The bond market will also focus on the Fed's quarterly economic projections, including rate forecasts, also known as the dot plot, which had showed a policy rate of 3.4% by the end of 2025 in September.
Inflation in the world's largest economy was in line with estimates, further clouding the rate cut trajectory for the upcoming year.
Shorter-tenure U.S. yields edged higher, while those on the longer end were flattish. The 10-year yield remained around the 4.40% mark in Asia hours.
The odds of a 25 bps cut this week stand at over 97%, but the odds of a reduction in January are just around 17%, according to the CME FedWatch Tool.
Meanwhile, minutes of the Reserve Bank of India's December meeting are due on Friday and could provide more clarity on policymakers' thinking about interest rate trajectory.
KEY INDICATORS:
** Brent crude futures LCOc1 0.1% higher at $73.95 per barrel, after easing 0.8% in the previous session
** Ten-year U.S. Treasury yield US10YT=RR was at 4.3908%; two-year yield US2YT=RR was at 4.2406%
** Thirteen Indian states to raise 203.25 billion rupees ($2.39 billion) via sale of bonds
** RBI to conduct three-day variable rate repo auction for 500 billion rupees
($1 = 84.8890 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Varun H K
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