India Bond Yields Expected to Hold Steady as Fed Meeting Looms

No image 5paisa Capital Ltd - 2 min read

Last Updated: 15th September 2025 - 12:55 pm

India’s 10-year government bond yields are likely to stay largely stable this week as markets brace for the U.S. Federal Reserve’s upcoming policy decision. A 25 basis-point rate cut is widely expected, and many traders are watching closely for clues on the Fed’s future rate path. 

Bond Yields Hold Steady Amid Fed Policy Expectations

The benchmark 10-year yield closed at 6.4867% on Friday and is forecast to trade in the 6.47%–6.51% range this week, according to a trader at a private bank. 

India’s inflation for August rose to 2.07%, up from a revised 1.61% in July, aligning with market expectations. 

Inflation Data and RBI’s Potential Rate Cuts in Focus

Beyond the Fed’s decision, domestic rate easing by the Reserve Bank of India (RBI) is also under scrutiny. While there is anticipation that RBI may begin trimming rates by 25-50 bps starting December, this hinges on whether downside risks to growth and inflation appear. 

Elsewhere, interest rate futures (OIS rates) saw little movement as traders waited for more signals. The one-year overnight index swap (OIS) ended around 5.4750%, and the two-year OIS rate was at 5.45%, while the five-year OIS was slightly higher. 

Oil prices and international yield trends are also influencing bond markets here. Markets are closely following U.S. yields and global inflation data, since dovish or hawkish tones from the Fed can shift sentiment sharply. 

Conclusion

Under steady circumstances, Indian bond rates are anticipated to stay within a small range of 6.47% to 6.51% as the week gets underway.  India's inflation trend, the U.S. Fed's interest rate decision and direction, and any indications from the RBI regarding when it would start relaxing will all be important factors.  The way these events turn out will probably determine how yield movements play out over the next few months.

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