India bonds give up day's gains as oil price spike adds to rate hike
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Indian government bonds ended lower as inflation concerns increased due to rising crude oil prices. The benchmark 10-year bond yield has been rising for nine consecutive weeks, causing worries about further rate hikes. Economists predict consumer inflation might exceed the upper tolerance band of the Reserve Bank of India. Additionally, the Reserve Bank has taken measures to curb currency speculation and stabilize the financial market.
Indian government bonds gave up their gains to end lower at the start of a holiday-shortened week on rising bets of a domestic rate hike as oil prices spiked and fanned inflation fears.The benchmark 6.94% 2036 bond yield ended at 7.3920%, after closing at 7.3789% in the previous session. Indian debt markets will remain shut on Tuesday for a local holiday.
Bonds had risen earlier in the day, with the 10-year yield easing to 7.35%, as decline in Treasury yields triggered value purchases. Bond yields move inversely to prices.
Bonds Corner Powered By India bonds give up day's gains as oil price spike adds to rate hike fears
Indian government bonds ended lower as inflation concerns increased due to rising crude oil prices. The benchmark 10-year bond yield has been rising for nine consecutive weeks, causing worries about further rate hikes. Economists predict consumer inflation might exceed the upper tolerance band of the Reserve Bank of India. Additionally, the Reserve Bank has taken measures to curb currency speculation and stabilize the financial market.
India corporate bond boom may scale record in 2026 as borrowers lock in ratesIndia bonds rise after flat open as sharp drop in US yields spurs value buyingOil, foreign flows in focus for rupee; bond traders eye rate-hike bets
YES Bank book value may fall up to 26% after SC ruling on AT-1 bonds Browse all Bonds News withIndia's 10-year benchmark bond yield has risen for a record nine consecutive weeks, climbing a total of 62 basis points.
"We believe the RBI's next policy move could be a 50 bps rate hike... whether this materializes at the scheduled MPC meeting or earlier will largely depend on the trajectory of the Indian Rupee, which, in turn, is likely to be influenced by movements in crude oil prices," said Puneet Pal, head of fixed income at PGIM India Mutual Fund.
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The benchmark Brent crude contract hovered at around $108 per barrel, after hitting $110 on Friday for the first time since May.
Persistently expensive crude is a negative for Indian fixed-income markets as it could widen the trade- and current-account deficits, place renewed pressure on the rupee and add to domestic inflation.
India's September consumer inflation accelerated to 5.54%, and is on track to cross 6%, the upper end of the central bank's tolerance band, in October, economists said.
Reserve Bank of India Governor Sanjay Malhotra said last week that India's recent foreign-exchange measures were aimed at curbing currency speculation, and while the central bank does not generally use monetary policy to safeguard financial stability, the two cannot be separated.
RATES
India's overnight indexed swap (OIS) rates recovered from the day's lows to end little changed.
The 1-year OIS ended at 6.53%, the 2-year rate ended at 6.60% and the 5-year rate settled at 6.78%.
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Figures reflect the source report and its stated period. This article is for information and is not investment advice.
