Government bond yields: Government bond yields are anticipated to trend downward in early trading on Thursday, as US Treasury yields experienced a slight decrease after the Federal Reserve maintained its projection for three rate cuts this year.

According to a trader from a private bank, the benchmark 10-year yield is likely to trade within a range of 7.05 per cent to 7.09 per cent, following its previous close of 7.0918 per cent on Tuesday.

"While the Fed has upheld its forecasts for three rate cuts, doubts linger among many market players regarding the actual implementation of these cuts, resulting in a subdued reaction in the Treasury market and a similar anticipation in the local market," the trader remarked.

US bond yields saw a decline, primarily driven by a notable drop in the two-year yield, while the 10-year yield moved marginally lower and remained above 4.25 per cent.

Federal Reserve Chair Jerome Powell stated on Wednesday that despite unexpected strength in recent inflation data, his outlook on price pressures remains relatively stable. 

He also affirmed the continuation of solid economic growth.

The Fed maintained the benchmark overnight interest rate within the 5.25 per cent to 5.50 per cent range and retained its projection for three rate cuts this year.

Powell stressed that the timing of these reductions hinges on officials gaining more confidence that inflation will persistently decline toward the 2 per cent target, despite the economy continuing to outperform expectations.

Although the recent data hasn't majorly altered the overall narrative, Powell noted a gradual decline in inflation, albeit with some bumps along the way.

Following the Fed's decision, the probability of a rate cut in June has increased to 75 per cent from 59 per cent, while the likelihood of three rate cuts in 2024 rose to 79 per cent from 63 per cent, according to the CME FedWatch tool.

Capital Economics suggested that subpar growth will contribute to bringing core inflation much closer to the 2 per cent target by the end of the year, potentially prompting the Fed to initiate rate cuts totaling 100 basis points starting in June.

(With Reuters Inputs)