Indian government bond yields rose on Friday, with the benchmark 10-year yield settling at a three-week high, tracking a surge in oil prices and U.S. peers amid the widening conflict in the Middle East.
The benchmark 10-year yield ended at 6.8339%, the highest since Sept. 12, compared with its previous close of 6.7765%. On a weekly basis, the yield rose seven basis points.
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“The yields have surged mainly due to geopolitical concerns.
The underlying fundamentals for the bond market continue to remain positive,” said Anitha Rangan, an economist at Equirus Group.
“Once the geopolitical situation normalises, the bond yields will go back to 6.70%-6.75% level. We have seen this happening time and again.”
Oil prices continued to climb on Friday as investors weighed the prospect of a wider Middle East conflict disrupting crude flows against a well-supplied global market.
Oil prices affect domestic retail inflation as India is one of the largest importers of the commodity.
U.S. Treasury yields rose on Thursday after strong services sector data supported forecasts for a smaller interest rate cut at the Federal Reserve’s November meeting.
The Fed started its rate-cut cycle in September with a 50 bps reduction and is expected to cut rates again in November and December.
Market participants awaited U.S. employment report for September, due after market hours, for further cues.
In India, the central bank’s monetary policy decision is due on Wednesday.
The Reserve Bank of India is expected to cut interest rates by a modest 50 bps over the next six months, according to a Reuters poll, which predicted it would likely wait until December to start easing.
Earlier in the day, New Delhi raised 390 billion rupees ($4.65 billion) via a weekly bond auction. It included a new 10-year bond, which will soon replace the current benchmark paper.
First Published: Oct 04 2024 | 5:53 PM IST
