Indian 10-year bond sees best day since early April as oil prices fall
A decline in Brent crude prices led to increased demand for Indian government bonds on Monday, causing the 10-year note yield to drop.
The benchmark 6.94% 2036 bond yield fell nearly 10 basis points to 7.3154% on Monday, marking its steepest one-day decline since early April, according to the Economic Times.
Brent crude futures fell nearly 5% to $108 per barrel in Asian trade. This followed Iranian negotiators leaving talks with Qatari mediators to end the war with the United States.
As the world's third-largest oil importer and consumer, India faces eased inflation and fiscal pressures from cheaper crude. This also tempers expectations for aggressive monetary policy tightening.
The rupee strengthened 0.05% to 94.90 per dollar, while the Nifty 50 index rose 1.7% to 23,440. Overnight indexed swap (OIS) rates also eased as lower oil prices softened rate hike concerns.
Gaura Sengupta, chief economist at IDFC First Bank, said the impact on government bonds will depend on US yields and the impact on crude oil.
Traders are now looking toward Tuesday's US midterm elections to see if results alter prospects for a US-Iran ceasefire and oil price corrections.
Sengupta noted that if concerns about an escalation with Iran grow after the election results, government bond yields could face upward pressure.