Indian bonds seen opening flat with focus on oil moves, Fed decision

MUMBAI: Indian government bonds are set to open little changed on Tuesday, as Treasuries and oil prices showed no major moves, with focus remaining on the US Federal Reserve’s monetary policy decision due a day later.

The 6.94% 2036 bond yield may trade between 7.46% and 7.49%, according to a trader at a primary dealership, after closing at 7.4826% in the previous session.

Indian states are set to raise 233 billion rupees ($2.45 billion) by selling bonds later in the day.

“We are in for another session of rangebound trading and shallow volumes, as there is hardly any change in factors,” the trader said.

“Even state debt quantum is not that large to cause any major trouble.”

Oil prices were steady, with the benchmark Brent crude contract trading below $115 per barrel in Asian hours.

The contract gained 6.2% last week, its biggest rise since the week ended September 11.

India is particularly vulnerable to elevated energy prices as it imports nearly 90% of its oil needs.

Consistently elevated prices risk feeding into the nation’s inflation trajectory, impacting the rupee and government finances.

The Reserve Bank of India raised the repo rate and shifted its stance earlier this month, hinting at more hikes, while markets are now pricing in over 100 bps of hikes in the next 12 months, according to overnight indexed swaps.

The Fed’s monetary policy decision is due on Wednesday evening and will be in focus, with markets looking beyond what is expected to be a pause for clues on whether further rate hikes remain on the table this year.