MUMBAI: Indian government bond yields were marginally higher on Monday as oil prices continued to move up, laying the ground for selling on profit after last week’s drop.
The benchmark 10-year yield was at 7.3150% as of 10:10 a.m. IST, after closing at 7.3003% on Friday.
The yield fell seven basis points last week, its biggest weekly drop in six.
With both India’s and the United States’ retail inflation numbers already reported, traders were looking to book some profit, and the rise in oil prices provided that opportunity, a trader with a state-run bank said.
Headline retail inflation for India eased to 5.72% in December from 5.88% in the prior month, while U.S consumer prices on a month-on-month basis fell for the first time in more than 2-1/2 years in December.
Meanwhile oil prices rose, with the benchmark Brent crude moving higher in all five trading sessions of last week, on optimism that China’s reopening will lift fuel demand from the world’s top crude importer, and also as the US dollar dropped to a seven-month low.
The benchmark Brent crude contract rose above $85 per barrel, and jumped 8.5% last week, biggest such move in three months. India is one of the largest importer of the commodity, and its price has a direct impact on local retail inflation.
The RBI has raised repo rate by 225 basis points in 2022 in its fight against inflation and is expected to raise one more time in February.
Traders further said, the federal budget continues to be the next major trigger which will provide a firm direction to bond yields.
Benchmark bond yield above 7.30% ahead of debt auction
Citi expects the government to gross borrow 15 trillion Indian rupees in the next financial year, even as Goldman Sachs has pegged the number at 16.80 trillion rupees.
Meanwhile, India aims to switch bonds worth 110 billion rupees ($1.35 billion) later in the day.
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