Indian bonds trade nearly flat as investors await Fed policy decision

The Indian government bonds were little changed on Wednesday as investors awaited the Federal Reserve monetary policy decision and Fed Chair Janet Yellen’s post-statement press conference, in an attempt to estimate the Fed's most likely step.

The yield on the benchmark 10-year bonds, which moves inversely to its price, hovered around 7.24 percent mark, the yield on super-long 30-year bonds remained steady at 7.491 percent and the short-term 2-year note yield up 1/2 basis point to 6.896 percent by 07:30 GMT.

The Federal Open Market Committee (FOMC), at its upcoming meeting is expected to keep the federal funds rate on hold at 0.25 percent – 0.5 percent. Investors will remain keen to focus on the comments made by the Fed Chair Janet Yellen for any signals about future policy.

Moreover, it is worth remembering that in the last FOMC meeting minutes, most of the discussion was about the growth and development in the labour market because of subdued employment reports in April and May. Therefore, the central bank is likely to welcome the recovery seen in employment in June and the upheaval signifies that risk is skewed towards a more hawkish Fed despite Brexit.

Moreover, the long awaited Goods and Services Tax (GST) is likely to be passed during the monsoon session of the Parliament which runs till August 12, after having being pending for more than a decade’s time. Near-term positive sentiments could falter if the bill is stalled yet again, delaying its implementation beyond 2017.

In addition, investors also await the announcement of the new RBI chief, which is anticipated to happen in the ongoing monsoon session of the Parliament.

Meanwhile, the Sensex rose 0.09 percent or 24.36 points to 28,000.88 and Nifty-50 futures trading 0.53 percent higher or 45.40 points at 8,629 by 07:50 GMT.