Indian government bonds
plummeted on Monday, as surging oil prices and rising U.S.
Treasury yields weighed on sentiment.
The benchmark 6.48% 2035 bond yield was at 6.8261% as of 10:30
a.m. IST, up 9 basis points, and after closing at 6.7369% on
Friday. Bond yields move inversely to prices.
The market is already grappling with heavy debt supply and
uncertainty over the central bank’s continued support.
Indian rupee plunged to a fresh record low of 93.94 against the
dollar amid pressure from oil and U.S. yields.
The benchmark Brent crude hovered near $113 a barrel after
Tehran said it would target its Gulf neighbour’s energy and
water infrastructure if U.S. President Donald Trump follows
through on threats to strike Iran’s electricity grid,
intensifying the conflict in the Middle East, now in its fourth
week.
Higher oil prices pose a particular risk for India, the
world’s third-largest crude importer, as they could heighten
domestic inflation and widen the current account deficit, adding
to the pressures already facing the bond market.
U.S. Treasury yields rose on inflation concerns.
The 10-year Treasury yield was above 4.40% for the first
time in nearly eight months, while the two-year yield, which is
more sensitive to interest-rate expectations, climbed to 3.93%.
Back home, Indian states aim to raise 574 billion rupees
($6.11 billion) through the sale of bonds on Tuesday, with the
quantum nearly 100 billion rupees more than scheduled. It will
push issuance to a record for the quarter and the financial
year.
RATES
India’s overnight index swap (OIS) rates soared with
activity dominated by payers tracking negative factors for
rates.
The one-year OIS rate was at 5.95% and the
two-year OIS rate was at 6.18%. The five-year
swap rate jumped 10 bps to 6.52%.