Indian bonds rise on steady oil, easing US rate-hike fears

MUMBAI: Indian government bonds rose on Thursday as steady oil prices eased macroeconomic concerns and fading U.S. rate-hike bets supported sentiment, while investors waited for news on India’s possible inclusion in Bloomberg’s flagship bond index.

Investor confidence improved as Brent crude stayed below $85 a barrel in Asian trade, snapping a three-day rising streak even after hostilities in the Gulf continued.

“For bonds, crude remains the key variable because of its impact on fiscal deficit and government subsidies,” said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank.

The benchmark 6.94% 2036 bond yield closed at 6.7478%, down 2.5 basis points from Wednesday’s close. Bond yields move inversely to prices.

Indian bond yields eased for a second straight session, tracking an overnight drop in U.S. Treasury yields after softer economic data reduced expectations of Federal Reserve rate hikes.

Several economists have also scaled back calls of a rate-hike by the Reserve Bank of India as inflation outlook improved.

Focus is now on Bloomberg’s decision, expected this month, on adding Indian debt to its Global Aggregate Index.

FAR-eligible Indian government bonds are already part of three emerging-market bond indices and the Bloomberg inclusion would mark their first entry into a global investment-grade debt benchmark.

Foreign investors have bought over $4.2 billion of FAR bonds since June 1, supported by India’s policy measures to boost dollar inflows and expectations of the index inclusion.

Traders will also watch demand at New Delhi’s 320-billion-rupee ($3.32 billion) bond auction on Friday for further cues.

Rates

India’s overnight index swaps eased as steady oil prices lifted broader market sentiment.

The 1-year dropped 4.25 bps at 5.89%, while the 2-year rate fell 5.5 bps to 6.0650%. The 5-year rate was down 4.5 bps at 6.3375%.