October 29, 2025

Get ready for a laid-back day in the Indian bond market! Traders are hitting the pause button, eagerly awaiting the big U.S. Federal Reserve decision this week to know which way the winds will blow. The benchmark 10-year government bond yield is hanging around the crucial 6.55% to 6.56% mark. As one trader from a private bank shared, “There are not many factors for traders to rely on, so we may see another session with shallow volumes and a narrow range.” That means not much action expected today. Adding to the calm, Indian states plan to raise 178 billion rupees (about $2.03 billion) in bond sales – a lot less compared to the earlier 309 billion rupees. This smaller sale means the market might not shake up much. Plus, bond yields and prices have their friendly inverse relationship. The 10-year yield closed at 6.5464% on Monday, which was the highest in a month! But traders don’t expect it to break that magic 6.55%-6.56% level today. Why the cautious mood? Traders have been trimming positions and short selling recently, thanks to growing hopes of a U.S.-India trade deal that could slash hefty tariffs — right now, Indian exports face tariffs up to 50% in the U.S.! A tariff cut could cool down big changes in India’s growth and interest rates. On the economic front, a Reuters poll points to a slightly faster Indian economy, with GDP growth nudging up to an average of 6.7% this fiscal year. When it comes to interest rates, India's overnight index swap rates (OIS) are steady but leaning towards paying side. The one-year OIS ticked up to 5.47%, and the two-year rate settled at 5.4150%. The five-year swap rate inched just a bit higher to 5.66%. Key global indicators also paint a calm picture today. Brent crude futures climbed a tiny 0.1% to $65.70 per barrel after slipping yesterday. The U.S. Treasury yields are steady too – the 10-year at 3.9819%, and the two-year at 3.4915%. Meanwhile, the Reserve Bank of India is ready to run an overnight variable rate repo auction worth 1.50 trillion rupees. So, if you’re watching the bond market, today is like waiting for a big twist in a Bollywood thriller – quiet now, but the Federal Reserve’s call could make it sizzling soon!

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Tags: Indian government bonds, Federal reserve, 10-year bond yield, Us-india trade deal, State debt auctions, Interest rates,