MUMBAI: Indian government bond yields rose in early trade on Friday, with the benchmark 10-year yield hitting a three-week high, tracking a surge in oil prices and US yields amid the widening conflict in the Middle East.
The benchmark 10-year yield was at 6.7996% as of 9:50 a.m. IST, the highest since Sept. 13, compared with its previous close of 6.7765%.
“Local bond yields have been tracking global factors and the sentiment has taken a hit due to geopolitical conflicts. Against this backdrop, cutoffs at the weekly auction today will guide the 10-year bond yield,” a trader at a private bank said.
New Delhi aims to raise 390 billion rupees ($4.64 billion) via a bond auction, which also includes a new 10-year note.
Oil prices were steady after a 5% surge overnight, with all eyes on key producing countries in the Middle East amid mounting concerns that the regional conflict could pose a threat to global crude flows.
Oil prices affect domestic retail inflation as India is one of the largest importers of the commodity.
Meanwhile, US Treasury yields climbed 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-basis-point reduction and is expected to cut rates again in November and December.
India’s 10-year bond yield hits 31-month low; traders eye debt supply
The US employment report for September, due after market hours on Friday, is awaited.
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.
India’s newly-appointed monetary policy committee members may see at least one dissenter calling for a rate cut when the group meets next week, economists said.
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