MUMBAI: Indian government bond yields opened higher in the first session of the new financial year, tracking a spike in oil prices, while the government’s borrowing plans for April-September weighed on sentiment.
The 10-year benchmark 7.26% 2032 bond yield was at 7.3419% as of 10:00 a.m. IST on Monday, after closing at 7.3180% on Friday.
The yield fell 14 basis points in March, but ended fiscal 2023 higher, registering a rise of 48 bps.
“Bond yields should continue to see some upward pressure this week, as oil has moved higher, and debt supply will also begin,” a trader with a state-run bank said.
Oil prices jumped on Monday following a surprise announcement by the Organization of the Petroleum Exporting Countries and their allies including Russia, known as OPEC+, to cut production to support market stability.
The group, which was expected to maintain its earlier decision to cut output by 2 million bpd until December, announced the additional cut of about 1.16 million bpd on Sunday.
This brings the total volume of cuts by OPEC+ to 3.66 million bpd, according to Reuters calculations, equal to 3.7% of global demand.
Benchmark Brent crude futures rose to $86.44 per barrel earlier in the day, their highest level in nearly four weeks. Elevated oil prices could impact India’s inflation trajectory, as it is one of the largest imports of the commodity.
Indian bond yields little changed as retail inflation dents mood
India’s retail inflation stayed above the Reserve Bank of India’s upper tolerance range for the most part of the last financial year.
The RBI will raise the interest rate by 25 bps and then pause for the rest of the year, according to a Reuters poll of economists, who said the central bank would still maintain its tightening stance.
The RBI’s policy decision is due Thursday.
Sentiment also weighed as the government plans to borrow 8.88 trillion rupees ($107.75 billion) - slightly above expectations - via bonds in April-September, which could steepen the yield curve.
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