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India Bonds Tumble as Oil Prices, US Yields Soar
24 Sep
Summary
- Indian bond yields surged due to rising US Treasury yields.
- Escalating oil prices are fueling inflation concerns in India.
- RBI may raise repo rate to 6.00% from 5.75% soon.
Indian government bonds experienced their worst session in over two months on Thursday, with the benchmark 10-year bond yield climbing to 7.1067%. This decline was primarily driven by a sharp increase in US Treasury yields, which reached their highest levels since 2007, and a surge in oil prices. India's substantial reliance on imported crude oil, around 90%, leaves it vulnerable to global price fluctuations, directly impacting domestic inflation.
Consequently, market participants are anticipating a hawkish stance from the Reserve Bank of India (RBI). Expectations are growing for a rate hike at the RBI's monetary policy announcement scheduled for October 7. Most market watchers foresee the terminal repo rate being adjusted upwards to 6.00%, a notable increase from the previously expected 5.75%. This potential tightening aims to counter the rising inflationary pressures fueled by higher energy costs and recent retail inflation figures.
