Indian bonds wobble on oil strain, RBI swap pullback
The yield on the benchmark 6.94% 2036 bond crept up 3 basis points to 6.8407% by 10:45 a.m. IST. It had jumped 5 bps on Monday, its steepest one-day rise in over a month
Indian government bonds dipped early Tuesday as oil prices rose above $90 a barrel, heightening concerns over the central bank's premature conclusion of a deposit incentive. The yield on the benchmark 6.94% 2036 bond increased 3 basis points to 6.8407% by 10:45 a.m. IST. Better-than-expected Foreign Currency Non-Resident (FCNR) inflows, amounting to over $50 billion, prompted the early termination of the RBI's swap facility, which had been in place since June.
This decision aimed to support liquidity and bond demand, as well as cushion markets from an oil shock. However, with the liquidity support waning, the market becomes increasingly susceptible to fluctuations in oil prices and global interest rates, particularly for India, a major oil importer. Overnight index swap rates surged, indicating a decline in market sentiment following the RBI's swap pullback.
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Also reported by 1 other outlet
- Indian bonds wobble on oil strain, RBI swap pullback brecorder.com
