Bond Yields Decline Post Federal Reserve Rate Decision
Government bond yields are poised to start the Thursday trading session lower, mirroring a drop in US counterparts post the US Federal Reserve's suggestion of wrapping up policy tightening and anticipating potential rate cuts.
Anticipated within the 7.18-7.23 per cent range, the opening for the 10-year benchmark bond yield comes after its previous close at 7.2581 per cent, noted a trader from a primary dealership.
Yogesh Kalinge, vice president at AK Capital Services, noted, "The unexpectedly dovish stance from the Fed sparked global optimism, potentially pushing the yield past the crucial 7.20 per cent mark at the opening. However, sustainability at these levels might be challenging as domestic factors remain largely unchanged."
The 10-year US yield hit its lowest point since August, influenced by the majority projection among Fed officials that the policy rate might decrease by the end of 2024.
Fed Chair Jerome Powell clarified, "People aren't projecting rate hikes," post the conclusion of the central bank's latest policy meeting, with median projections indicating a potential three-quarters of a percentage point decline from the current 5.25-5.50 per cent range for the Fed funds rate.
While the Fed has raised its policy rate by 525 basis points since March 2022, Kalinge mentioned, "The Fed's indication of a rate cut is unlikely to impact the Reserve Bank of India's rate cut expectations." He suggested a potential shift in the outlook for RBI rate cuts in Jul-Sept to a more bullish stance.
In recent events, the RBI maintained its key repo rate at 6.50 per cent for the fifth consecutive meeting.
Additionally, oil prices saw an increase after a larger-than-expected weekly drawdown from US crude storage and the Fed's policy outcome.
