India bonds rise on bets of more supportive measures; oil tempers optimism
- Benchmark 6.48% 2035 bond yield was at 7.0345%
MUMBAI: Indian government bonds rose in early trade on Wednesday, following four sessions of declines, after the government raised import tariffs on gold and silver to curb overseas purchases, a move being seen as the first of several measures expected.
The benchmark 6.48% 2035 bond yield was at 7.0345% as of 10:15 a.m. IST, after ending at 7.0458% on Tuesday. The yield had risen 13 basis points over the last four sessions.
Yields move inversely to bond prices.
India imposed a 10% basic customs duty and a 5% Agriculture Infrastructure and Development Cess (AIDC) on gold and silver imports, taking the effective import tax to 15% from 6%, potentially dampening demand and supporting the rupee.
“Even though the move may not have a major direct impact on inflation, it could help narrow the current account deficit, and more importantly (it) has raised hopes that the authorities could undertake more measures,” trader with a foreign bank said.
Still, broader focus remains on global factors, which are not currently favouring any sustained bull run for local bonds, the trader added.
Oil prices stayed elevated above $106 per barrel as differences between the U.S. and Iran over a proposal to end the war has raised concerns about prolonged supply disruptions.
Earlier this week, U.S. President Donald Trump said ceasefire talks with Iran were on life support, while Tehran emphasised its sovereignty over the key Strait of Hormuz.
Given India’s reliance on imports for nearly 90% of its crude needs, higher oil prices could stoke inflation, pressure the currency, widen the current account deficit, and strain the government’s fiscal position.
Rates
India’s overnight index swap rates were largely unchanged after rising sharply in last few sessions.
The one-year swap rate was at 6.0450%, while the two-year swap rate was at 6.2750%. The liquid five-year OIS rate was at 6.66%.
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