India bonds end tad higher on softer oil
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Indian government bonds experienced a modest rise as the 10-year bond yield neared a one-month peak. Investor optimism was bolstered by decreasing oil prices, although caution was still prevalent ahead of the upcoming US midterm elections. The benchmark bond yield displayed its lowest point since early October after notable drops in earlier trading sessions.
Indian government bonds ended marginally higher on Tuesday, with the 10-year bond hovering near a one-month high, buoyed by softer oil prices, though caution before US midterm elections and profit booking capped gains.Brent crude plunged more than 7% on Monday to $104.80 a barrel after talks between Iranian and Qatari officials rekindled hopes of a peace deal and steadier Middle East supplies. It rebounded to around $106 on Tuesday after reports that the United States struck Iran's Qeshm Island.
As the world's third-largest oil importer, India is especially vulnerable to elevated crude prices, which can stoke inflation, undermine the rupee and cloud the fiscal outlook.
Bonds Corner Powered By India bonds wipe out early gains as oil rebounds
Indian government bond yields have seen a slight uptick, predominantly influenced by the volatile crude oil market and geopolitical tensions. The market reacted sharply to recent US-Iran conflict reports. Traders are now closely watching the upcoming US midterm elections, which could impact Congressional dominance. As economic conditions evolve, the demand for state-debt auctions remains a key focus, with investors showing caution amid global uncertainties.
ETMarkets Smart Talk | Bond markets have priced in nearly four rate hikes. Where should investors invest now?Jubilant Pharmova plans to raise Rs 800 crore via maiden bond issue10-year bond yield eases 10 bps to 7.31% in sharpest fall since AprilOil slide hands India's 10-year bond its best day since early April Browse all Bonds News withTraders are also recalibrating expectations for the Reserve Bank of India's rate path, as softer oil could temper domestic inflation risks and ease pressure on debt markets globally.
The benchmark 6.94% 2036 bond yield dropped 1 basis point to 7.3012%, its lowest since October 9. It dropped nearly 10 bps in the previous session, in its biggest one-day decline since early April.
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The yield briefly touched a low of 7.2780% before profit booking trimmed gains.
"7.25% on the 10-year yield is the next crucial level, which if breached, may lead to 7.15%," said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank, adding that the US midterms and their impact on the US-Iran conflict and crude trajectory will decide further moves in bonds.
Investors are closely watching the US midterm elections, which will determine whether Republicans retain control of Congress during Trump's final two years in office or cede majority control to Democrats, an outcome that could have a bearing on the US-Iran war.
RATES
India's overnight indexed swap rates declined as falling oil revived receiving interest.
The one-year OIS fell 3 bps to 6.63%, the two-year eased 3.75 bps at 6.64%, and the five-year dropped 5 bps to 6.7275%.
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Figures reflect the source report and its stated period. This article is for information and is not investment advice.
