MUMBAI: Indian government bond yields edged lower on Tuesday, following a further pullback in oil prices and selling pressure that was seen in the previous session.
The major focus, however, will remain on central bank meetings scheduled later this week, including of the US Federal Reserve and the Reserve Bank of India.
The benchmark Indian 10-year government bond yield was at 7.4234% as of 0540 GMT, after ending five basis points (bps) higher at 7.4454% on Monday.
“There is some recovery today in bond prices as oil is somewhat lower, and even the US yields are not rising much beyond 4%,” a trader with a private bank said.
Global oil prices have remained subdued and traders expect a further decline as more extensive COVID-19 curbs in China raised fears of slowing fuel demand in the world’s second-largest oil consumer.
Indian bond yields seen little changed; US Fed, RBI in focus
The benchmark Brent crude contract was at $93.40 per barrel. India is one of the largest importers of crude oil and the price moves have a direct impact on inflation.
Meanwhile, the Fed’s policy decision is due on Wednesday, with broad expectations of a fourth consecutive 75-bps rate hike. However, its future guidance and commentary will be key.
The 10-year US Treasury yield was trading at 4.02%, after hitting 4.11% on Monday. Traders are awaiting the outcome of the RBI’s monetary policy meeting on Thursday, which, Reuters reported, was most likely to discuss the central bank’s response to the government after failing to meet its inflation target for three quarters in a row.
India’s retail inflation stood at 7.41% in September, well above the 2%-6% target band for the ninth straight month. Meanwhile, seven Indian states are expected to raise 107.13 billion Indian rupees ($1.30 billion) through the sale of bonds later in the day.
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