Indian government bonds gained and the 10-year benchmark yield dropped to a 12-week low on Monday, following a rally in global bond markets, as crude oil prices slumped after the US-Iran peace deal.
The yield on the benchmark 6.94% 2036 note dropped 3.2 basis points to 6.8637%, its lowest intraday level since March 25. The yield is now 20 bps above pre-war levels.
Meanwhile, the US 10-year yield also fell nearly 6 bps to 4.42%.
The Indian rupee was also trading near a five-week high at 94.5750 per dollar.
The US and Iran officials announced a preliminary in the Middle East and reopen the . The agreement led to a sharp fall in crude oil prices, which had surged as high as $120 a barrel after the conflict began on February 28.
Brent crude prices tumbled 4.5% to $83.40 per barrel, the lowest since March 10.
Easing are a positive for India, the world’s third-largest oil importer, as they help ease pressure on inflation, the rupee and the country’s trade deficit.
“We expect yields to ease further towards the 6.75–6.80% range in the near term, supported by improved sentiment and a pickup in FPI inflows into government bonds. That said, the market will await the formal signing of the agreement and tangible improvements in energy and fertilizer supplies, which could influence the inflation trajectory,” said Dhawal Dalal, President and CIO – Fixed Income, Edelweiss MF.
Meanwhile, investors watch out for India’s inclusion in the Bloomberg Global Aggregate Index, with Bloomberg Index Services expected to review the inclusion again this month.
Foreign investors have poured more than $1.6 billion into Indian bonds over the past six sessions.
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