MUMBAI: India’s government bond yields are expected to open marginally lower on Monday, tracking the continued drop in oil prices. The benchmark 10-year yield is likely to be in a 7.26%-7.32% band.
The yield ended a tad higher at 7.3012% on Friday.
After Friday’s gain, yield movements are likely to show a downward bias at opening due to oil prices, a trader at a primary dealership said. Domestic yields will track oil prices and US Treasury yields in the absence of major domestic cues today, they said.
Benchmark crude oil dropped by about 2% on Friday and logged a third consecutive weekly decline on worries about Chinese demand amid rising COVID cases and on caution ahead of an agreement on a Western price cap on Russian oil.
China, the world’s top oil importer, on Friday reported a new daily record for COVID-19 infections, as cities across the country continued to enforce mobility measures and other curbs to control outbreaks.
Oil prices fell early on Monday as protests in China over strict COVID-19 curbs fuelled concerns over the demand.
The movement in oil prices has a direct impact on local inflation as India is one of the largest importers of the commodity.
The easing retail inflation has increased hopes that the Reserve Bank of India (RBI) may go slow on its pace of interest rate hikes.
Meanwhile, US Treasury yields closed slightly higher on Friday.
Indian bond yields are likely to move in a narrow range throughout the day in the absence of major triggers.
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At the lower end, yields will find support at the 7.25% level and at the higher end, yields will be supported at 7.33% and then at 7.35%, a dealer at a private bank said.
Market participants will also exercise caution ahead of India’s July-September GDP data, due Wednesday.
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