India bonds set to rise; oil, US inflation data eyed

MUMBAI: Indian government bonds are likely to rise on Wednesday, supported by optimism over measures to attract foreign inflows, with focus also on oil prices after escalations in the Middle East conflict and U.S. inflation data due later in the day.

The yield on the benchmark 6.94% 2036 note may trade in the 6.90% to 6.95% range, a private bank trader said. It closed at 6.9163% on Tuesday, easing 10 basis points over the last four sessions.

Yields move inversely to bond prices.

“Fundamentally things are the same and overall sentiment is supportive, so the positive momentum should persist, though gains may be limited after the recent 10 bps 10 basis points decline,” the trader said.

Oil prices rose marginally in Asian hours, with the benchmark crude at around $92 per barrel, after the U.S.

military launched new strikes against Iran and as data showed another large draw in U.S. crude stocks.

U.S. strikes on Iran followed President Donald Trump’s vow to respond to the downing of a U.S. Apache attack helicopter, escalating tensions and threatening a fragile ceasefire between Washington and Tehran.

India imports about 90% of its crude oil, leaving the economy highly vulnerable to swings in oil prices.

Locally, bond traders remain hopeful of a further decline in yields after the Reserve Bank of India announced a mechanism for state-run companies to raise external commercial borrowing and for lenders to raise non-resident deposits.

These form a part of a larger set of measures to boost foreign participation in government securities and attract large dollar inflows announced on Friday, when the RBI also kept its policy rate unchanged.