India bond rally likely to extend marginally as Brent slips below $100/barrel
The 6.94% 2036 bond yield is expected to trade between 7.00% and 7.05%, according to a primary dealer
Indian government bonds may experience a slight increase in the opening auctions on Wednesday, as the bond yield has decreased by six basis points over the past two days, coinciding with a fall in oil prices. The benchmark 6.94% 2036 bond yield is projected to fluctuate between 7.00% and 7.05%, according to a market insider. Although there was some investor confidence earlier, the 10-year bond yield being below 7% currently might remain unrealistic.
Oil prices have plummeted for the fifth consecutive day and are only marginally different in Asian hours due to increased crude deliveries from Saudi Arabia, following the resumption of the East-West pipeline and vessel transit through the Strait of Hormuz. However, the decline was limited after U.S. President Donald Trump announced a peace deal would materialize post the U.S. mid-term elections in early November, without which he could potentially dismantle the agreement.
India, being a significant importer of crude oil, is highly sensitive to fluctuations in global oil prices, with high oil prices and a poor monsoon exacerbating inflation concerns and expectations of a rate hike in the next fortnight. Market participants are increasingly focusing on a rate hike following the Federal Reserve's 25 basis point interest rate increase last week, the first such hike since 2023.
The Reserve Bank of India's monetary policy decision is scheduled for October 7, and most analysts now anticipate a rate hike. Meanwhile, the 10-year Treasury yield remains confined to a narrow range of 4.95%-5.00%, with the upper limit acting as a significant barrier. The overnight indexed swap rates are projected to remain within a range.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
