India’s 10-year yield slips as Brent crude retreats from peak
India's benchmark 10-year bond yield fell 1 basis point to 7.4640% as Brent crude dropped 2.14% to $114 a barrel, easing back after touching a six-month high the prior week.
The 6.94% 2036 bond, which serves as India’s benchmark, saw its yield move lower against Friday’s close during the morning session, as measured at 10:40 a.m. IST. Since bond prices and yields move in opposite directions, the small decline points to a modest uptick in debt prices early in the day.
Brent had surged 6.2% in the week before, driven by worries over supply following repeated attacks on Saudi Arabia, ahead of this session’s reversal. Even with crude cooling off, traders are still watching for the possibility of fresh disruptions to Saudi output.
Government bonds in India have faced pressure since August, when overseas investors started withdrawing funds. Under the fully accessible route — which permits foreign funds to trade without restriction — net selling has totaled 153 billion rupees (roughly $1.6 billion) since that outflow began. The benchmark yield has now climbed for ten consecutive weeks, marking its longest upward stretch since 1998.
One trader at a private bank summed up the guarded sentiment by suggesting that attempting to catch a falling knife serves little purpose, reflecting reluctance to buy into the current downturn.
Investor focus has now shifted to where India’s inflation is headed and what the Reserve Bank of India will do next, with the market factoring in upwards of 100 basis points of rate increases over the coming twelve months. On a global scale, the Bank of Japan, the Federal Reserve, and the European Central Bank are all expected to lift rates before the year closes out, as robust demand linked to artificial intelligence and an energy shock stemming from the Iran conflict push inflation higher. The Fed’s own verdict is due Wednesday, and markets largely anticipate no change in its rate.
India’s overnight indexed swap rates tracked the bond market’s direction: the 1-year tenor held steady at 6.5825%, the 2-year edged down marginally to 6.65%, and the 5-year dropped close to 2 basis points to reach 6.8050%.
Across markets Praevis tracks, fluctuations in Brent crude continue to influence emerging-market bond yields and the currencies of oil-importing nations, while anticipated rate moves from the Fed, ECB and BoJ keep shaping global Treasury and bond yield trends more broadly.
Source: Economic Times Markets