INDIA BONDS-Indian bond yields flattish as market eyes Fed guidance

By Bhakti Tambe

MUMBAI, Nov 1 (Reuters) - Indian government bond yields ended largely unchanged on Wednesday as traders avoided placing large bets ahead of the outcome of the U.S. Federal Reserve's policy meeting.

The 10-year benchmark bond yield ended at 7.3599% after closing at 7.3558% in the previous session.

"We do not expect the Federal Reserve policy to change the current market narrative. Unless there is any unforeseen major event, we expect the 10-year yield to continue to trade in the 7.30%-7.40% band in the near term," said Churchil Bhatt, executive vice president at Kotak Mahindra Life Insurance.

The U.S. central bank's monetary policy outcome is due after the close of the Indian bond market on Wednesday. While investors expect no change in interest rates in the world's largest economy, there is a 25% chance of a hike in December.

U.S. yields rose on Wednesday ahead of the Fed decision. The central bank has raised rates by 525 basis points since March 2022 as it battled inflationary pressures, and markets believe that rates will remain higher for longer.

Barring the Fed guidance, market participants also await more clarity on the Reserve Bank of India's (RBI) planned bond sales.

Markets anticipate around 500 billion rupees ($6 billion) of bond sales by the RBI in the current quarter after it announced its plans to do so last month

Traders are also eying cues from the RBI's expected meeting with select banks later this week, with the discussion likely to be focussed on banking system liquidity.

Traders additionally await a fresh supply of debt as New Delhi aims to sell 300 billion rupees of bonds on Friday, including a new 50-year paper.

India's maiden sale of ultra-long bonds will lower borrowing costs for the government as large insurance and pension funds are expected to scoop up the issue, fund managers and analysts told Reuters. ($1 = 83.3102 Indian rupees) (Reporting by Bhakti Tambe; Editing by Sonia Cheema)