Indian bond traders may look to cut positions with Brent on cusp of $100
MUMBAI: Indian government bonds could witness some selling pressure in opening deals on Wednesday, reversing some of the previous session’s gains, as benchmark Brent crude has climbed to nearly $100 per barrel, stoking inflation fears. The yield on the benchmark 6.94% 2036 bond is expected to move between 6.94% and 6.98%, a trader at a private bank said, after closing at 6.9431% in the previous…
Mumbai: In the wake of crude oil prices nearing $100 per barrel, Indian government bonds may face selling pressure at the start of the trading week, according to a private bank trader. The yield on the key 6.94% 2036 bond is forecast to hover between 6.94% and 6.98%, down from 6.9431% in the preceding session. The trader cited the potential impact of rising oil prices on inflation as the reason for the anticipated decrease in bond yields.
This comes after Iran launched a series of missile strikes against US military assets and bases in retaliation for US attacks on Iranian oil tankers. US Secretary of State Marco Rubio has warned that the US will continue to target Iranian oil tankers in response to such attacks. The oil price surge has climbed for the fourth consecutive day in Asian trading hours.
A sustained increase could exacerbate India's inflation problems and affect government finances. The central bank has been actively withdrawing liquidity through overnight variable-rate reverse repos, rather than resorting to bond sales. The banking sector has seen a record-high liquidity surplus due to large inflows from the diaspora, which could further fuel inflation and buoy financial asset prices if it persists.
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