MUMBAI: Indian government bond yields ended largely unchanged on Wednesday as market participants closely tracked oil prices, which have witnessed a spike due to the recent escalation in the Israel-Iran conflict.
The benchmark 10-year bond yield ended at 6.2615%, compared with Tuesday’s close of 6.2646%.
Pawan Somani, founder of Infinask Advisors cited negative sentiment from the rise in global crude oil prices following continued geopolitical uncertainty. “Weakness in rupee and cautiousness ahead of Fed outcome resulted in subdued volumes,” he added.
The benchmark Brent crude contract was around $76 per barrel and is up more than 10% in the last four sessions after concerns over supply disruptions rose due to the Middle East conflict.
India imports most of its crude requirements and elevated prices could pose an upside risk to the inflation outlook, thwarting the limited possibility of another rate cut from the Reserve Bank of India.
Indian bond yields, swap rates ease after dovish comments from RBI chief
Bond yields had dipped on Tuesday after dovish commentary from RBI Governor Sanjay Malhotra, who said inflation below the central bank’s current projections could open up policy space and that the change in stance does not imply an immediate reversal in the policy cycle.
Earlier this month, the RBI cut its key policy rate by a steeper-than-expected 50 basis points but changed its stance to “neutral” stance from “accommodative”, leading analysts to suggest the easing cycle has ended.
The minutes of this meeting are due after market hours on Friday.
Traders also await the Federal Reserve policy decision due after Indian market hours. Even though no rate action is anticipated, the major focus would remain on guidance and signals on the quantum of cuts in 2025.
Rates
Indian overnight index swap (OIS) rates ended marginally higher amid shallow trading volumes.
The one-year OIS rate ended at 5.48% and the two-year OIS rate ended at 5.46%. The liquid five-year OIS rate ended at 5.5.68%.
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