MUMBAI: Indian government bonds are expected to trade largely unchanged on Wednesday after the benchmark yield breached a key level in the previous session, as investor focus remains on the Federal Reserve’s monetary policy decision and outlook.

The 10-year yield is likely to move between 6.73% and 6.77%, a trader with a private bank said, compared with the previous close of 6.7588%.

“More than the decision, the economic projections as well as the dot plot for 2025 are important triggers for the market, which will dominate the next direction for Treasuries as well as local bonds,” the trader said.

The Fed’s policy decision will come after Indian markets close on Wednesday.

While the US central bank is widely expected to cut interest rates by 25 basis points, markets are fearing an uncertain outlook and cautious commentary for 2025.

Inflation remains above the Fed’s 2% target, which is expected to be highlighted by the central bank and could go against the doves.

India bond yields rise in lead up to domestic inflation data

The debt market will also focus on the Fed’s quarterly economic projections and the dot plot, which had showed in September a policy rate of 3.4% by the end of 2025.

The 10-year Treasury yield remained around the 4.40% mark in Asia hours, with the odds of a 25-bp cut at over 97%. However, the chances of a reduction in January are just around 16%, according to the CME FedWatch Tool.

Locally, markets are awaiting debt supply as well as minutes of the Reserve Bank of India’s December meeting, both due on Friday.

New Delhi aims to raise 290 billion rupees ($3.42 billion)through sale of bonds, which includes a new five-year bonds.

The RBI maintained status quo on policy rates earlier this month, but infused liquidity into the banking system through a cut in banks’ cash reserve ratio.