India bonds poised for another weak opening with oil, rupee in focus

MUMBAI: Indian government bonds may open lower again on Thursday as crude oil prices rise towards $100 per barrel because of the worsening Middle East conflict, clouding the outlook for inflation and the rupee.

The benchmark 6.94% 2036 bond yield is likely to move in a range of 6.78% to 6.83%, a trader with a private-sector bank said.

The yield settled at 6.8012% on Wednesday.

“Slowly but surely, bears are now taking control of the market, and we could see a test of 6.85% again, if things persist in the similar manner,” the trader said.

Brent crude futures crossed $96 per barrel in Asian hours, their highest in more than six weeks, with the United States launching a new round of strikes on Iran and Yemen’s Houthis targeting oil tankers in the Red Sea.

The US military said it carried out a 12th consecutive night of attacks on Iran hours after US President Donald Trump vowed to destroy an Iranian bridge or power plant every time Iran shoots at a ship in the Strait of Hormuz.

The rising attacks could further disrupt energy supplies, threatening to deepen the shortfall in global markets triggered by the closure of the Strait of Hormuz, which used to transit nearly a fifth of global supply before the war.

India, the world’s third-largest oil importer, is vulnerable to any supply shock as higher crude prices can swell its import bill, push up inflation and pressure the rupee.

The rupee fell 0.3% on Wednesday to 96.5650 per dollar, its lowest level in two months, and within striking distance of the record low hit on May 20.