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India Bonds Hit 2-Year Low Amid Rate Hike Fears
30 Sep
Summary
- Indian government bonds reached their weakest point in over two years.
- Rising global yields and oil price volatility impacted the market.
- August inflation exceeded RBI's target, signaling persistent price pressures.
Indian government bonds concluded the most recent quarter at their weakest levels in over two years. This downturn was largely driven by significant swings in global oil prices and a substantial rise in global yields.
Market sentiment was further affected by expectations of interest rate hikes from the Reserve Bank of India (RBI). This anticipation, combined with increased issuance of long-term bonds and efforts by the RBI to drain liquidity, contributed to supply concerns.
Adding to these pressures, India's retail inflation rate accelerated to 4.82% in August, exceeding the RBI's medium-term target of 4%. This persistent price pressure, broadening beyond food and fuel, underscores the challenges facing policymakers.
Despite these headwinds, Indian bonds have shown some resilience compared to global peers, supported by strong government finances and ample liquidity within the banking system.