Indian Bond Yields Rise as Fed Talks About Rate Hike

Indian government bond yields experienced an increase in early session on Thursday due to the U.S. Federal Reserve hinting at more rate hikes in the next six months, although rates were left unchanged for now as expected. The benchmark 7.26% 2033 bond yield experienced a rise to 7.0247%, after closing at 7.0069% in the previous session. According to a trader with a state-run bank, if the Fed outlook plays out, it could push rate cuts in the U.S. back, which will cause a knock-on effect on India. The Fed paused on Wednesday after hiking rates by an aggregate of 500 basis points in 10 consecutive meetings since March 2022. Officials signalled in new projections that borrowing costs may still need to rise. Policymakers now expect the funds’ rate to top 5.6% this year, up from the 5.1% in March projections, while nine of 18 officials see the rate moving up another half of a percentage point beyond the current 5.00-5.25% range. Meanwhile, three others feel the need for rates to go even higher. The odds of a rate hike by the Fed in July have risen to nearly 70%, but bets of another rate hike after that stand around 13%.