MUMBAI: Indian government bond yields were lower on Wednesday, after a holiday, tracking a drop in oil prices as well as US yields, aiding investor sentiment.
The 10-year benchmark 7.18% 2033 bond yield was at 7.3444% as of 10:00 a.m. IST, after ending at 7.3769% in the previous session.
“There is a gap down opening in local bond yields as external factors turned supportive at least for the time being, but sustaining these levels would be crucial for any meaningful rally,” a trader with a state-run bank said.
US yields fell, with the 10-year down more than 20 basis points (bps) after rising above the 5%-mark on Monday as investors bought into the recent sell-off.
The 10-year yield was at 4.82% after hitting a more than 16-year high of 5.02% on Monday.
Meanwhile, oil prices eased, with the benchmark Brent crude contract comfortably below the $90-per-barrel mark, after a flurry of slow economic data from Germany, the euro zone and Britain weighed on the outlook for energy demand.
India bond yields rise marginally after central bank policy minutes
Falling oil prices can ease some inflationary pressures for importers like India, where retail inflation has stayed above the central bank’s 4% target for months.
The Reserve Bank of India’s (RBI) monetary policy committee will remain focused on aligning inflation to its target and only after it achieves that on a sustained basis, will its attention shift to the objective of growth, the October meeting minutes showed.
The decision to reinforce the 4% retail inflation target follows inflation returning to its 2%-6% comfort zone, but does not necessarily signal rates will remain higher for longer, two external members of the committee told Reuters.
Meanwhile, traders continue to await any progress on the central bank’s debt sale plan.
The RBI will conduct open market sales of bonds once government spending picks up and there is an improvement in the durable liquidity surplus, two sources aware of the development told Reuters.
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