Government bonds are
likely to begin the new week on a cautious note as focus turned
back to oil prices after tension marked the first round of peace
talks, with Iran shutting a crucial transit point and the U.S.
threatening to restart attacks.
The yield on the benchmark 6.94% 2036 note is likely to move between 6.823 and 6.88%, according to a trader with a private bank. It closed at 6.8533% on Friday, posting its fourth consecutive weekly decline. Yields move inversely to bond prices.
“Though the current developments do not change the overall
view, it makes the journey towards 6.80% target a bit more
complicated,” the trader said.
The benchmark Brent crude contract eased below $80 per
barrel in Asian trading, after the first round of talks between
Iran and the U.S. resulted in the two countries agreeing to a
roadmap toward a final deal within 60 days.
Shipping through the Strait of Hormuz had slowed on Sunday,
pushing crude prices higher, after Iran closed shipping and
peace talks began on a bumpy note.
Fluctuations in oil prices impacts India as the nation
imports nearly 90% of its crude oil requirement and a sustained
fall could ease inflationary pressure and support the rupee,
helping the central bank’s efforts to attract dollar inflows.
Foreign investors have injected more than $2.25 billion into
domestic bonds so far in June.
The Reserve Bank of India’s rate panel chose to adopt a wait
and watch approach in keeping interest rates on hold earlier
this month, to see if higher oil and food prices are likely to
lead to more generalised inflation, minutes of the committee’s
meeting released on Friday showed.
RATES
India’s overnight index swap rates are likely to remain
little changed in early deals after recent declines.
The one-year swap rate ended at 5.9%, and
the two-year rate closed at 6.06%. The
five-year rate settled at 6.34% on Friday.