MUMBAI: Indian government bond yields were flattish at the start of the week, as traders awaited the U.S. Federal Reserve policy decision and the domestic budget announcement for directional cues.

India’s benchmark 10-year yield was at 7.1757% as of 10:05 a.m. IST, on Monday, following its previous close at 7.1760%.

“We are likely to see very little move in bonds today, as market is now waiting for the major events, which would be the guiding factor for the remaining quarter of this financial year,” a trader with a state-run bank said.

Bond yields eased marginally after benchmark bond saw strong demand at the last auction ahead of the budget announcement on Feb. 1.

India’s government may keep its gross market borrowing for 2024/25 close to the current fiscal year’s level as it looks to restrain borrowings, two government sources told Reuters.

The government may target gross borrowing of the next fiscal year between 15 trillion rupees ($180.40 billion) and 15.50 trillion rupees, against a planned 15.43 trillion rupees this year.

Despite being an election year, with Prime Minister Narendra Modi seeking a rare third consecutive term in power, the government is likely to reduce fiscal deficit by at least 50 basis points.

India bond yields await directional cue from debt sale

A Reuters poll also predicted the fiscal deficit as a percentage of GDP to decline to 5.30% in 2024/25 from 5.90% this fiscal year, with projected gross borrowing of 15.60 trillion rupees.

Focus is also on the Fed’s Jan. 30-31 meeting after strong economic data prompted a reduction in bets of the timing and pace of rate cuts in 2024.

The odds for a rate action in March stand around 48%, down from 87% last month, according to the CME’s FedWatch Tool.

Oil prices also rose, with the benchmark Brent crude contract moving towards the $85 per barrel mark, on escalating tensions in the Middle East.