Indian government bonds are
likely to give up the previous session’s gains in early deals on
Friday, pressured by elevated oil prices and rising US
Treasury yields, while the fresh debt supply will further test
investor appetite.
The benchmark 6.48 per cent 2035 bond yield may move
in a 7.00 per cent – 7.06 per cent range, a private bank trader said. It had ended
at 7.0203 per cent on Thursday.
Later in the day, New Delhi will raise ₹32,000 crore
($3.34 billion) through the sale of bonds, which includes a new
40-year paper.
“There should be some selling pressure tracking global
factors, but a major spike in yields is unlikely,” the trader
said.
Rising inflation fears continued to drive a selloff in US
Treasuries, with the yield on the 10-year paper crossing the
crucial 4.50 per cent handle to its highest level in a year.
This week, producer prices posted their biggest increase
since early 2022, while annual retail inflation rose at its
fastest pace in three years, prompting some Federal Reserve
policymakers to warn of potential interest rate hikes.
Oil prices firmed on Friday as ship attacks and seizures
exacerbated supply concerns.
For India, which imports nearly 90 per cent of its crude
requirements, elevated prices could fuel inflation, pressure the
rupee, widen the current account deficit and complicate the
government’s fiscal calculations.
India raised petrol and diesel prices for the first time in
four years by about ₹3 per litre, which traders said is
unlikely to move the needle and should have a very limited
impact on bonds.
RATES
India’s overnight index swap rates are expected to rise, as
fears of imminent rate hikes could discourage receiving.
The one-year swap ended at 6.09 per cent on
Thursday, while the two-year rate closed at
6.2725 per cent. The five-year rate settled at
6.6075 per cent.
($1 = 95.7625 Indian rupees)