Oil pain to drag Indian bonds lower
- The benchmark 6.94% 2036 bond yield is expected to trade between 6.80% and 6.85%, a private-bank trader said
MUMBAI: Indian government bonds are poised to weaken in early trade on Monday as an intensifying US-Iran war drove crude over $90 a barrel, rekindling inflation and rupee worries, while the lack of an update on Bloomberg index inclusion adds to the pressure.
The benchmark 6.94% 2036 bond yield is expected to trade between 6.80% and 6.85%, a private-bank trader said.
It ended Friday’s session at 6.7799%.
US forces struck Iran for a ninth consecutive day on Monday as the number of confirmed US military deaths in the renewed fighting rose and concerns grew over shipping through the Strait of Hormuz.
Only four vessels made the crossing on Sunday, down from eight the previous day, LSEG data showed.
Brent crude futures climbed 2.7% to $90.47 in Asian trade, its highest since June 11, extending gains after rising 15.9% last week.
India is the world’s third largest oil importer and consumer and is highly vulnerable to oil price swings.
“Adding duration is a tactical call for now, until there is clarity on how far oil will rally in the near term and how it shapes the inflation and growth outlook,” a private bank trader said.
“The lack of index-inclusion news so far may also weigh on prices.” Focus is also on foreign investor demand, which had ramped up in anticipation of Indian bonds’ inclusion in Bloomberg’s Global Aggregate Index.
Average daily purchases by foreign investors slowed to 3.6 billion rupees last week from 9 billion rupees the week prior. So far, they have poured nearly $4.3 billion into bonds under the Fully Accessible Route since June 1.