MUMBAI: Indian government bonds came off lows to end little changed on Monday as oil prices gave up gains that were triggered by the U.S. attack on Iran’s nuclear facilities over the weekend.
The yield on the benchmark 10-year bond ended at 6.3053%, compared with its previous close of 6.3087%. The most liquid 6.79% 2034 bond yield ended at 6.3767%, compared with 6.3795% previous close. Yields move inversely to bond prices.
“Markets are jittery, expecting the worst, though the economy looks fairly firmly placed as of now. We need to wait and see how things progress,” Madan Sabnavis, chief economist at Bank of Baroda, said.
Iran said that the U.S. attack on its nuclear sites expanded the range of legitimate targets for its armed forces and called Trump a “gambler” for joining Israel’s military campaign against the Islamic Republic.
Brent crude oil futures were around $77 per barrel in Asian hours, after hitting a five-month high of $81.40 earlier in the day.
Indian bond yields end a tad higher on week amid worries over oil surge
Oil is a major component of India’s import bill and surging prices prove to be inflationary.
Earlier this month, the Reserve Bank of India reduced its inflation forecast to 3.7% and cut its key lending rate by a steeper-than-expected 50 basis points to assure stakeholders about focus on economic growth and aid in faster transmission, according to the policy minutes.
IDFC First Bank expects India’s central bank to stay on hold in August and October and cut rates by 25 basis points in December.
Rates
Indian overnight index swap (OIS) rates ended flat, in line with government bonds.
The one-year OIS rate ended at 5.52%, while the two-year OIS rate settled at 5.53%. The most liquid five-year OIS rate was at 5.75%.