Indian bond yield rises 2 bps on US treasury uptick after Fed rate cut

Bonds

Indian bond yields rose 2 basis points on September 18 morning , following the upward trend in US treasury yields after the Federal Reserve’s 25-basis point rate cut.

The 10-year benchmark bond yield opened at 6.491 percent, up from its previous close of 6.473 percent. This rise mirrored the 10-year US treasury yield, which rose to 4.06 percent from 4.04 percent.

Early on September 18, the Federal Reserve, as expected, cut its benchmark interest rate by 25 basis points to 4-4.25 percent, the first reduction since December 2024 and the first of President Donald Trump’s second term.

The Federal Open Market Committee voted 11–1 in favour of the cut, with newly appointed governor Stephen Miran dissenting in support of a deeper half-percentage point cut. Governors Michelle Bowman and Christopher Waller, who had pushed for easing in July, backed the quarter-point reduction this time.

The Fed said, “Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.” It added that “downside risks to employment have risen”, prompting the shift in policy.

The Summary of Economic Projections showed policymakers now expect three rate cuts in 2025 — up from two pencilled in June — with two more quarter-point reductions this year, and additional moves in 2026 and 2027. Median estimates put underlying inflation at 3.1 percent at the end of 2025, unchanged from June, while growth forecasts were lifted to 1.6 percent in 2025 and 1.8 percent in 2026.