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MUMBAI: Indian government bond yields jumped in early trading on Thursday after the country was not immediately included in J.P. Morgan’s emerging market index and as rising oil prices also added to worries about rising inflation.

The benchmark Indian 10-year government bond yield was at 7.4552% as of 0415 GMT.

The yield jumped to 7.4816% earlier in the session, its highest since June 21.

It ended at 7.3621% on Tuesday, posting its biggest single session drop in one-and-a-half months.

The market was closed on Wednesday.

“As expected, there was a gap-up opening and we are now set to hit 7.50%, which can be seen today itself,” a trader with a state-run bank said.

“With oil prices also moving up, it would be very difficult for yields to now see any major fall in the near term.” Indian government bonds remain on the radar for inclusion in J.P. Morgan’s emerging market local currency debt index after a review on Tuesday, the bank said.

Indian bond yields rise as supply worries haunt after RBI rate hike

Some investors had hoped the Wall Street bank include Indian bonds this year after Russia’s exit from the GBI-EM benchmark, which is tracked by an estimated $240 billion of funds. However, other investors cited investment hurdles, “including a lengthy investor registration process and the operational readiness required for trading, settlement and custody of assets onshore,” J.P. Morgan said in a statement.

India’s inclusion in the index was set to be pushed into next year due to a number of issues, Reuters reported last week, while index provider FTSE Russell also deferred including India in its FTSE Emerging Markets Government Bond Index.

The constant rise in global oil prices is also hurting sentiment as India is one of the largest importers of the commodity and higher prices have a direct impact on inflation.

Oil prices edged up after the Organization of Petroleum Exporting Countries and its allies, including Russia, agreed to slash oil production by about 2 million barrel per day, which would squeeze supplies in an already tight market.

The benchmark Brent crude contract is up by 6.4% so far this week and was last at $93.60 per barrel.

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