Bond yields lower tracking decline in oil prices, U.S. peers
By Bhakti Tambe
MUMBAI, Nov 28 (Reuters) - Indian government bond yields edged lower in early trade on Monday as a continued decline in oil prices provided comfort to market participants, while lower U.S. Treasury yields also aided sentiment.
The benchmark Indian 10-year government bond yield IN072632G=CC was down 4 basis points (bps) at 7.2609% as of 0456 GMT.
Yields opened down mainly due to a fall in oil prices but will move in a narrow range through the session, Shrisha Acharya, a fixed income dealer at Mumbai-based DCB Bank said.
"The 7.25%-7.33% range remains the crucial band for benchmark yield. If crude prices keep falling, we may see yields breaking below the 7.25% mark, but unlikely to sustain at that level," he said.
Oil prices fell over 2.5% early on Monday to $81.37 per barrel as protests in China over strict COVID-19 curbs fuelled concerns over demand.
U.S. yields were down 5 bps at 3.6481%.
Oil price moves have a direct impact on local inflation as India imports more than two-thirds of its oil requirements.
Easing inflation has raised hopes that the Reserve Bank of India (RBI), which is scheduled to announce its policy decision on Dec 7, may go slow on its pace of interest rate hikes.
Most market participants now expect the central bank to raise its key lending rate by 35 bps after three back-to-back 50-bps hikes. It has raised the repo rate by 190 basis points since May to 5.90%.
The 10-year yield will largely remain in the range of 7.22%-7.40% till the RBI policy outcome, Acharya said.
There was demand for papers with 10-14 year maturity from insurance companies and pension funds in morning trade, a trader at a primary dealership said.
"If that demand sustains, yields may inch further down," he added.
Reporting by Bhakti Tambe Editing by Swati Bhat and Nivedita Bhattacharjee
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.