Yields on Indian government bonds rose in early trading on Friday, following a rise in oil prices and U.S. yields amid escalating conflict in the Middle East, pushing the benchmark 10-year bond yield to its highest level in three weeks.
The yield on the benchmark 10-year Treasury note was 6.7996% as of 9:50 a.m. ET, the highest since September 13, compared with the previous close of 6.7765%.
A trader at a private bank said, “Municipal bond yields are following global factors, and geopolitical conflicts have taken a toll on sentiment. Against this backdrop, the cutoff in today’s weekly auction is for 10-year bonds.” “It will be a guide to yields.”
New Delhi aims to raise 390 billion rupees ($4.64 billion) through a bond auction, including a new 10-year bond.
Oil prices stabilized after rising 5% overnight as the Middle East’s major producers were in the spotlight amid growing concerns that regional conflicts could threaten global oil flows.
Since India is one of the largest importers of primary products, oil prices have an impact on retail inflation in the country. Meanwhile, U.S. Treasury yields rose on Thursday after strong service sector data confirmed expectations for a modest rate cut at the Federal Reserve in November. The Fed began its rate cutting cycle in September with a 50 basis point rate cut, and is expected to cut rates again in November and December.
The US employment report for September is expected to be released after market hours on Friday.
The Reserve Bank of India is expected to cut interest rates modestly by 50 basis points over the next six months, and is likely to wait until December to begin easing, according to a Reuters poll.
At least one opponent of India’s newly appointed Monetary Policy Committee members could push for a rate cut when they meet next week, economists said. (1 dollar = 83.9630 Indian rupees)
