Bond yields could rise to 7.5% on crude, inflation and global debt costs
Domestic bond yields may rise as much as forty-five basis points. Elevated crude prices and rising inflation expectations weigh on sentiment. The Reserve Bank of India's open market operation sales will increase bond supply. This action drains surplus liquidity from the financial system. Bond traders anticipate yields could reach around seven point five zero percent.
Domestic bond yields in India could rise to 7.50% in the near future, according to bond traders. The recent spike is attributed to elevated crude prices, rising inflation expectations, and the increasing cost of global debt, which have dampened the market sentiment. The Reserve Bank of India's open market operation (OMO) sales may exacerbate the pressure by increasing government bond supply as the central bank works to drain surplus liquidity.
The benchmark 10-year yield recently closed at 7.05%, down from the previous close of 7.07%. Experts predict that 10-year yields may inch toward 7.25% and then attempt to reach around 7.50% if supply side shocks and energy security issues worsen. Soumya Kanti Ghosh, chief economic adviser at the State Bank of India, stated this in a recent report.
While domestic liquidity may bolster front-end yields to some extent, it does not necessarily eliminate long-end pressure, as an oil shock can impact the market through multiple channels simultaneously, Ghosh added.
Written by urgent.news from The Economic Times - Top News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
