Indian government bonds end slightly higher on softer oil prices
The 10-year bond yield reached near a one-month high as falling crude prices influenced domestic debt markets.
Indian government bonds ended marginally higher on Tuesday, according to the Economic Times, as the 10-year bond hovered near a one-month high. The movement was supported by softer oil prices, although gains were limited by profit booking and caution ahead of the US midterm elections.
The benchmark 6.94% 2036 bond yield fell by 1 basis point to 7.3012%, marking its lowest level since October 9. The yield had previously dropped nearly 10 bps in the preceding session, which was its largest single-day decline since early April.
Brent crude prices fell more than 7% on Monday to $104.80 a barrel following talks between Iranian and Qatari officials. While the price rebounded to approximately $106 on Tuesday after reports that the United States struck Iran's Qeshm Island, softer oil may temper domestic inflation risks.
Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank, said that the 10-year yield's next crucial level is 7.25%. He noted that the US midterms and their effect on the US-Iran conflict and oil prices will determine future bond movements.
India's overnight indexed swap rates also declined. The one-year OIS fell 3 bps to 6.63%, the two-year eased 3.75 bps to 6.64%, and the five-year dropped 5 bps to 6.7275%.